Timothy L. and Jane Williams - Page 19

                                        - 19 -                                         

          355 applies, and therefore he did not take an exchanged basis in             
          that stock pursuant to section 358.  Sec. 358(a)(1), (c); see                
          sec. 7701(a)(44).  It therefore follows that petitioner received             
          the SPS stock in a distribution governed by section 301, at a                
          basis equal to the fair market value of the stock.  Sec. 301(d).             


               On the limited record before us, we conclude that the fair              
          market value of SPS’s issued capital stock was equal to the value            
          of the net assets transferred to SPS in the exchange, viz,                   
          $30,647.  See United States v. Davis, 370 U.S. 65, 72 (1962);                
          Philadelphia Park Amusement Co. v. United States, 130 Ct. Cl.                
          166, 126 F. Supp. 184, 189 (1954).  Although the most important              
          asset of SPS would have been the “human capital” that petitioner             
          and his associates brought to the business, and although the                 
          inauspicious circumstances under which SPS was organized might               
          well have raised doubts about its ultimate success, the effect of            
          these factors upon the value of the corporation’s stock cannot be            
          determined from the record.  Therefore, petitioner’s initial                 
          basis in the portion of the SPS stock he retained was $30,647.7              



               7 We observe that the tax results to petitioner of our                  
          determination of the value of SPS stock received by him would be             
          the same if we determined that value to be zero or some other                
          figure.  This is because the amount includable in petitioner’s               
          income as a result of his receipt of the SPS stock would in all              
          likelihood exactly equal his additional basis in the stock for               
          the purpose of computing his share of the allowable loss incurred            
          by SPS for 1992.  See text infra pp. 20-21.                                  



Page:  Previous  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  Next

Last modified: May 25, 2011