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payment by petitioner to Elaine. However, they place different
interpretations upon these events. The Government contends that
petitioner was the owner of the disputed 22.5 percent interest in
Blackbob and, as such, should be taxed on the $800,000 portion of
the cash supplied by Suzanne that was allocable to him.
Petitioner argues that, at the time of the exchange, although he
acted as a conduit between Suzanne and Elaine, Elaine was the
owner of 22.5 percent of Blackbob and, as the seller of that
22.5-percent interest to Suzanne, should bear whatever the
applicable tax burden might be.
After the estate of his father was settled, petitioner
received 45 percent of Blackbob from Gordon Realty. The divorce
court allocated 22.5 percent of Blackbob, half of that 45-percent
interest, to Elaine. At the same time, petitioner and Suzanne
were having their interests in their father's estate and Gordon
Realty arbitrated. The arbitration resulted in Suzanne's getting
all of Blackbob in exchange for $1,386,002.30.
The results of the divorce decree and the arbitration award
were mutually inconsistent, with 22.5 percent of Blackbob awarded
to Elaine by the divorce court, and, about a year later, 100
percent to Suzanne in the entirely separate arbitration
proceedings. Petitioner, Elaine, and Suzanne resolved the
inconsistency by having Elaine yield her 22.5-percent interest in
Blackbob and accept $800,000, instead. Elaine consented to this
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