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petitioners' contention. For example, the bank required MOC to
pledge its leasehold interest in, and right to all rents from, 5
Acre, and MOC consented to assignments of leases. In short,
petitioners' contention is meritless.
Petitioners emphasize that the records relating to the
operation of the mall were consistent with the alleged oral
sublease (i.e., maintaining a separate checking account for the
activity, reporting the activity on Mr. Buda's income tax
returns, and recording the $30,000 rent payments on Mr. Buda's
and MOC's books). While these records may be consistent with a
sublease, they are not convincing evidence of a sublease. See
Electric & Neon, Inc. v. Commissioner, 56 T.C. 1324, 1339 (1971)
(stating that we closely scrutinize transactions between
shareholders and their closely held corporations because such
transactions are easily manipulated), affd. without published
opinion 496 F.2d 876 (5th Cir. 1974). We conclude that MOC did
not sublease 5 Acre to Mr. Buda and that, upon liquidation of
MOC, Mr. Buda received the right to use, and receive all income
from, 5 Acre.
Respondent determined that, on the date of liquidation, the
fair market value of the leasehold interest in 5 Acre was
$5,200,000. Respondent's assumptions were reasonable, and his
analysis was thorough. Petitioners' contention that the fair
market value should be lower (i.e., $4,850,000) was unpersuasive.
Accordingly, we sustain respondent's determination relating to
the gain realized on liquidation of MOC.
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