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the liquidating distribution (i.e., $393,071 of property
received, a $495,401 stock basis, and a resulting capital loss of
$102,330). On its 1988 return, MOC reported an $82,189
abandonment loss relating to the wave pool equipment. Mr. Buda,
MOC's sole shareholder, reported this loss on his 1988 return.
OPINION
I. Nature and Value of the Leasehold Interest
The amount realized on liquidation of MOC is in dispute.
More specifically, the parties disagree about the nature and
value of the leasehold interest in 5 Acre that Mr. Buda received.
Respondent contends that the leasehold interest in 5 Acre
included the right to use, and receive all income from, the
property. Petitioners contend that MOC subleased 5 Acre to Mr.
Buda for $30,000 per year and that, on liquidation, Mr. Buda
received the right to the $30,000 annual payments. The nature of
the leasehold interest received by Mr. Buda, therefore, turns on
whether MOC subleased 5 Acre.
Petitioners assert that MOC entered into an oral sublease
with its sole shareholder, Mr. Buda. Mr. Buda and Daniel Cooper,
Mr. Buda's accountant, testified. Their testimony relating to
the terms of the oral sublease was vague and contradictory.
Moreover, neither witness could offer the Court any explanation
why this sublease was not in writing, while all other agreements
relating to 5 Acre were in writing (i.e., Mr. Buda's lease with
the Kings, his assignment of that lease to B & M, and B & M's
sublease to MOC). Furthermore, the record controverts
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