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Petitioners bear the burden of proving that respondent's
determination of FMV is incorrect.1 Rule 142(a); Estate of
Gilford v. Commissioner, 88 T.C. 38, 51 (1987); Burbage v.
Commissioner, 82 T.C. 546, 560 (1984), affd. 774 F.2d 644 (4th
Cir. 1985). A transaction between a sole shareholder and his
corporation is not an arm's-length transaction and is subject to
special scrutiny. Ingle Coal Corp. v. Commissioner, 174 F.2d
569, 571 (7th Cir. 1949), affg. 10 T.C. 1199 (1948); Estate of
Schneider v. Commissioner, 88 T.C. 906, 938 (1987), affd. 855
F.2d 435 (7th Cir. 1988); Yamamoto v. Commissioner, 73 T.C. 946,
954 (1980), affd. without published opinion 672 F.2d 924 (9th
Cir. 1982).
Respondent now contends that the Corporation is deemed to
have recognized income under section 311 in the amount of
$196,532 due to the sale of the Property ($620,000 FMV less the
Corporation's adjusted basis). Respondent also argues that the
Laniers must recognize additional income under sections 301 and
316 in the amount of $195,000 ($620,000 FMV less the purchase
price). Petitioners, on the other hand, maintain that the FMV of
the Property was $425,000. On that basis, petitioners argue that
they did not receive a constructive dividend. Petitioners
1 In response to petitioners' argument, we observe that the
fact that respondent has reduced the claimed valuation of the
Property from that set forth in the notices of deficiency,
without more, does not suffice to relieve petitioners of the
burden of proof on this issue. Estate of Smith v. Commissioner,
57 T.C. 650, 656 (1972), affd. 510 F.2d 479 (2d Cir. 1975).
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