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1. Petitioner's children transferred their interest in
Blackbob for $100,000.
2. Petitioner acquired Elaine's 22.5-percent interest as a
conduit to complete the sale to Suzanne.
3. Petitioner transferred to Suzanne his children's
interest, his own 22.5-percent interest, and the 22.5-
percent interest which he had simultaneously reacquired for
that purpose from Elaine.
4. Petitioner did not in substance sell anything to Elaine,
and did not realize any gain on the transaction with Elaine.
Contrary to the Government's argument, we find that Elaine,
not petitioner, was the owner of the disputed 22.5-percent
interest in Blackbob immediately prior to the tripartite
exchange. The Government relies on the Separation Agreement,
which changed Elaine's interest from the right to ownership of
22.5 percent of Blackbob to "$800,000 in cash or other good
negotiable instrument, secured by equitable interest on
[Blackbob]." The Government states in its reply brief that the
"Separation Agreement was made and entered into, and executed by
petitioner and Elaine Gordon on October 9, 1987." Based on the
execution of the Separation Agreement on October 9, 1987, the
Government contends that at the time the exchange occurred,
Elaine no longer had an ownership interest in Blackbob; she held
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