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and receive all income from, the underlying realty and that the
fair market value was $5,200,000.
2. Did Mr. Buda, pursuant to section 333, make a valid
election to defer the recognition of gain on the liquidation? We
hold that he did not.
3. Were petitioners entitled to deduct an abandonment loss?
We hold that they were not.
All section references are to the Internal Revenue Code in
effect for the year in issue.
FINDINGS OF FACT
Petitioners, husband and wife, resided in Pigeon Forge,
Tennessee, at the time they filed their petition. In 1969, C.A.
and Bessie King leased approximately 11 acres of land to Mr.
Buda, and Mr. Buda assigned the lease to B & M Development Co. (B
& M), a corporation he owned with two other shareholders. In
1978, B & M extended the duration of the lease from 1978 to 2028.
The lease and the assignment were recorded in Sevier County,
Tennessee.
In 1977, B & M subleased approximately 5 acres of the Kings'
property (5 Acre) to Mountain Ocean Corporation. (MOC), an S
corporation that, at the time of the sublease, was owned by Mr.
Buda and three other shareholders. The sublease, which was
recorded, grants MOC a leasehold interest in 5 Acre through 2028.
After entering into the sublease, MOC constructed a wave pool
facility on the property. In 1984, Mr. Buda acquired 100 percent
of MOC's stock. During that year, MOC, in response to a dramatic
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