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in a 3-way agreement, and the parties exchanged their interests
using a title company as an escrow.
Suzanne placed $1,386,002.30 in the escrow account.
Petitioner purchased the interests of his children in Blackbob
for $100,000. The children transferred their interest to him,
and he, in turn, transferred that interest over to Suzanne. The
$100,000 payable by petitioner to his children was paid to them
on his behalf by the title company out of the $1,386,002.30
supplied by Suzanne.3 As indicated above, the Government has
acknowledged petitioner's acquisition of his children's ownership
interest in Blackbob and conceded that $100,000 of the
adjustment.
As we view this case, the controversy should be decided on
the basis of the substance of the matters affecting petitioner,
Elaine, and Suzanne. In substance, Elaine was the true owner of
22.5 percent of Blackbob, and she in effect sold that interest to
Suzanne, using petitioner as a conduit to enable him to transfer
it to Suzanne along with his own 22.5 percent plus that which he
acquired from his children, thus enabling Suzanne to become the
sole owner of Blackbob.4
To summarize:
3 See supra note 1.
4 To be sure, some portion of Blackbob was owned by
Suzanne's children, but no question has been raised with respect
thereto, presumably because Suzanne acquired her children's
interest or was otherwise content to treat it as her own.
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Last modified: May 25, 2011