- 24 -
(Candace). The notice of deficiency issued to the Cravenses for
1980 also included the disallowance of two personal exemptions
claimed for the Cravenses' children. The Cravenses filed timely
joint petitions for redetermination contesting the above-
described notices of deficiency.
The Cravenses' reporting position was unique among the test
case petitioners insofar as the Cravenses had adjusted (reduced)
their tax basis in their Candace stock by the amount of a "non-
taxable distribution" from Candace in 1980. Having reduced the
basis of their Candace stock, the Cravenses reported a capital
gain of $7,200 on their 1980 tax return after surrendering the
stock to Mr. Kersting in exchange for cancellation and return of
the note evidencing their primary loan.14
D. Alexander Notices of Deficiency
Denis Alexander (Mr. Alexander) is a broker and investor
who first met Mr. Kersting in Los Angeles in the early 1960's.
Mr. Alexander lent money to Mr. Kersting's subchapter S leasing
corporations in the 1970's, participated in the acquisition of
First Savings, and participated in some of the Kersting programs
at issue in Dixon II.
14 Although the Cravenses' reporting position was unique
insofar as they had reported a capital gain in a taxable year in
dispute before the Court, we note that test case petitioners
Robert L. and Carolyn S. DuFresne had also reported a capital
gain (albeit in a year subsequent to the years in dispute)
upon the surrender of stock in Charter Financial Corp. to
Mr. Kersting. Like the Cravenses', the DuFresnes' capital gain
was attributable to their reduction of the tax basis of their
stock as opposed to an increase in its value.
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