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Frank Agostino, Alan G. Merkin, Mary Ann Perrone, and
Susan M. Flynn, for petitioner.
Patricia Y. Taylor and Clare W. Darcy, for respondent.
BEGHE, Judge: Respondent determined the following
deficiency and additions to tax:
Additions to Tax
Year Deficiency Sec. 6653(a)(1) Sec. 6661
1988 $477,816 $23,891 $119,454
In so doing, respondent determined that Martin Ice Cream Co. (MIC
or petitioner) recognized taxable gain of $1,430,340 on the
distribution of stock of its newly created subsidiary, Strassberg
Ice Cream Distributors, Inc. (SIC), to one of petitioner’s two
shareholders, Arnold Strassberg (Arnold), in redemption of his
51-percent stock interest in petitioner. Shortly before trial,
we granted respondent's motion for leave to amend answer to
allege that a subsequent sale of assets to the H�agen-Dazs Co.,
Inc. (H�agen-Dazs), by Arnold and SIC should be attributed to
petitioner under Commissioner v. Court Holding Co., 324 U.S. 331
(1945).
We reject respondent’s attempt to apply Court Holding,
although we uphold respondent’s original determination that
petitioner recognized gain on the redemption of Arnold’s stock in
petitioner. We find that petitioner’s gain is substantially less
than the gain determined by respondent. We reject respondent’s
imposition of an addition to tax under section 6653(a)(1) but
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