- 20 -
At the closing of the MSSTA transaction, Mr. Scott, in his
capacities as president, director, and stockholder of MSSTA,
knew, and consequently MSSTA knew, inter alia, that (1) the MSSTA
transaction took the form that it did because Mr. Scott did not
want to pay any taxes as a result of that transaction; (2) the
Scotts were not purchasing an aggregate 21-percent stock interest
in AST in exchange for the nominal cash amount of ten cents a
share and/or their aggregate 48-percent stock interest in MSSTA;5
(3) AST was not purchasing MSSTA's assets for only $300,000, but
instead, in substance, was purchasing those assets for an amount
substantially in excess of $300,000 consisting of cash and a 21-
percent stock interest in AST; (4) the Service could decide not
to accept the return positions that MSSTA and the Scotts intended
to take with respect to the MSSTA transaction (viz., MSSTA would
report only the $300,000 that it received directly from AST as
the amount realized from the sale of MSSTA's assets, and the
Scotts would not report any income since there were no liqui-
dating distributions to them by MSSTA) because the Scotts would
be paying only a nominal cash amount for a 21-percent stock in-
terest in AST and would not be reporting any income attributable
to liquidating distributions by MSSTA to them; and (5) MSSTA's
tax liability would be about $10,000, and the Scotts would not
5 The Scotts acquired a total of 33 percent of the stock of AST
as part of the MSSTA transaction. See supra p. 19.
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