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pattern in Example (1) is different from the situation present in
the instant case.
Conclusions
Based on all the facts and circumstances present in this
record, we conclude, on balance, that the strong corporate
business purposes and nondevice factors outweigh and overcome the
device factors, so that the distribution by Homes of Chapel stock
to Mr. Pulliam qualifies as tax-free under section 355. However,
we sustain respondent's determination that petitioners are
taxable on the $40,000 received in 1992 from Mr. Deckard on the
installment sale of 49 percent of Chapel's stock, which they did
not report on their Federal income tax return for that year.
Petitioners are also liable for the accuracy-related penalty
under section 6662(a) with respect to the $40,000 omitted from
their 1992 return.
Respondent raised a new and alternative issue for the first
time at trial and on brief. That issue is whether Homes, in
substance, distributed enough stock in Chapel to constitute
control within the meaning of section 368(c), as required by
section 355(a)(1)(D). This was not an issue or ground contained
in the notice of deficiency or in respondent's answer to the
petition. Respondent filed no amendment to the answer raising
this issue. Petitioners have opposed the untimely raising of
this issue. We agree with petitioners. We conclude that the
issue is not properly before us and therefore we need not
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