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arguably earned prior to Burke’s death. However, neither Thorpe
nor any other heir ever pursued any such claim.
Petitioner caused INI to make payments to Burke's estate to
satisfy his obligation under the buy-sell agreement. Later,
petitioner attempted to recharacterize these payments as a bonus,
rather than payments for the stock. This attempted
recharacterization, if accepted, would have served two purposes:
First, it would have preserved or given rise to an income tax
deduction to INI, which petitioner would now own outright, for
compensation paid and payable; second, it would have eliminated
petitioner's personal tax liability for the constructive
dividends arising from INI's payments that were used to help
petitioner pay for Burke's stock. When petitioner filed his
income tax returns for 1984 and 1986, he understated his income
to the extent he failed to include the constructive dividend
amounts. Petitioner filed amended returns only after respondent
had begun an income tax audit of Burke's estate and Thorpe had
refused to file fiduciary income tax returns for the estate
showing a bonus received rather than payments under the buy-sell
agreement.
Second, petitioner’s explanations of his behavior have been
implausible and inconsistent. Shortly after Burke’s death,
petitioner told Thorpe that petitioner would buy Burke's stock
from the estate, in accordance with the buy-sell agreement, but
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