- 54 -
result of the MSSTA transaction was based on the representations
in Mr. Bosworth's letter regarding that $300,000 purchase price.
Similarly, Mr. Hrynik's opinion about MSSTA's solvency after the
MSSTA transaction was based on the representations in the
Bosworth letter and Mr. Hrynik's review of the asset purchase
agreement and the stock redemption agreement between MSSTA and
Mr. Carter. In rendering that solvency opinion, Mr. Hrynik was
not aware that the parties to the MSSTA transaction had agreed
that the Scotts could buy a specified number of shares of AST
stock for a nominal cash amount. On the instant record, we re-
ject petitioners' contention regarding Mr. Scott's and MSSTA's
reliance on Mr. Hrynik's opinion that MSSTA's tax liability would
not exceed $10,000 and that MSSTA would remain solvent after the
MSSTA transaction. In fact, Mr. Hrynik cautioned Mr. Scott that,
because the transactions reflected in the MSSTA transaction draft
documents that Mr. Scott gave him were to occur simultaneously
and in no particular order, the Service might treat those trans-
actions as one transaction for tax purposes. In response, Mr.
Scott told Mr. Hrynik not to spend very much time reviewing the
tax consequences of the MSSTA transaction because Mr. Scott had
consulted with AST's accountants and Mr. Scott believed that he
understood the tax consequences of that transaction.
Based on the entire record before us, we find that the
transfer by MSSTA to Mr. Scott of $104,580 of the amount that
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