Michael Ferguson and Valene Ferguson - Page 21

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               In Kinsey v. Commissioner, 477 F.2d 1058 (2d Cir. 1973),               
          affg. 58 T.C. 259 (1972), the taxpayer donated to his alma mater            
          a controlling interest in a corporation that previously had                 
          adopted a plan of liquidation pursuant to recommendation by its             
          board of directors and approval by its shareholders.  The Court             
          of Appeals for the Second Circuit recognized that the                       
          Commissioner's case in Hudspeth v. United States, supra, was                
          stronger because the donor in that case retained a majority of              
          the corporation's stock, but, nevertheless, applied the basic               
          principle in Hudspeth v. United States, supra, that the reality             
          and substance of events determine the incidence of taxation and             
          not formalities and remote hypothetical possibilities.  Kinsey v.           
          Commissioner, supra at 1063; see also Jones v. United States, 531           
          F.2d 1343, 1346 (6th Cir. 1976) (rejecting taxpayer's attempt to            
          distinguish Hudspeth v. United States, supra, the court stated,             
          “we view a taxpayer's control over the corporation as only one              
          factor in determining whether a liquidation is practically                  
          certain to occur” (fn. ref. omitted)).  The court focused on the            
          fact that although the donee received a majority of the                     
          corporation's shares, the donee could not have unilaterally                 
          stopped the liquidation because it did not have the requisite               
          two-thirds control.  Kinsey v. Commissioner, supra at 1063.  The            
          court concluded that, considering all of the circumstances, the             
          transfer of stock to the donee was an anticipatory assignment of            
          liquidation proceeds.  Id.                                                  




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