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if it satisfies an obligation or liability of that person.
Applying Washington State law, the Court of Appeals concluded
that the obligation to purchase Joann's stock was John's and not
Moriah's. Thus, the court held that “Joann's transfer to Moriah
did relieve John of an obligation, and therefore constituted a
benefit to John.” Id. at 459.
Even if we assume, arguendo, that the stock for stock
exchange was “on behalf of” petitioner Dawes, petitioner
Praegitzer is not necessarily insulated from tax. Respondent is
not seeking to tax petitioner Praegitzer on that exchange itself,
which is tax free to him under section 355 regardless of the
application of section 1041. Rather, respondent is seeking to
include in his income, as dividends received by petitioner
Praegitzer from 303 Products, $103,000 of cash and $21,000 in
forgiveness of indebtedness, a total of $124,000.
The MSA and the reorganization agreement resolved any
marital claims between petitioner Praegitzer and petitioner
Dawes. The agreements provided for the resolution of petitioner
Dawes' marital claims to petitioner Praegitzer's stock in
Ameritech, and for the concurrent severance of petitioner
Praegitzer's interest in that corporation, through a divisive
reorganization, culminating in the stock for stock exchange that
left petitioner Praegitzer with no ownership of Ameritech and as
sole owner of 303 Products. When 303 Products distributed
$103,000 of cash to petitioner Praegitzer and forgave his $21,000
debt, it was done at his own behest, as sole shareholder of that
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