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includes the period it held the assets transferred to SIC. Petitioner
presented no evidence to establish that its holding period of the
assets, or any part of the assets, transferred to SIC was less than 1
year. Inasmuch as petitioner has the burden of proof on this issue
and has presented no evidence, we accept respondent's determination
that the gain realized by petitioner was a long-term capital gain.
Petitioner’s long-term capital gain of $141,000, resulting from
petitioner’s distribution of SIC stock in redemption of Arnold’s stock
in petitioner, is petitioner’s only capital gain in 1988.
Accordingly, petitioner had "net capital gain" (as defined in section
1222) for purposes of section 1374. When the $141,000 of capital gain
is included, petitioner’s net capital gain exceeds $25,000 and also
exceeds 50 percent of petitioner's taxable income for 1988, as defined
in section 1374(d).33 Accordingly, petitioner satisfies the
requirements of section 1374(a) and is liable for tax imposed by
section 1374(b) on its recognized gain of $141,000.
5. Additions to Tax
a. Negligence
For taxable year 1988, section 6653(a)(1) adds to tax an amount
equal to 5 percent of an underpayment of tax required to be shown on
the return that is due to negligence or disregard of rules or
regulations. Sections 6653(c)(1) and 6212 essentially define an
33 Petitioner reported an ordinary loss of $278 on its Form
1120S filed for the 1988 taxable year. Petitioner's 1988 taxable
income did not include any net operating loss deductions pursuant
to sec. 172, nor any deduction for organization expenditures
allowed by sec. 248.
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