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Petitioner did not report any gross income on account of
either the receipt of the Wedtech shares in 1983 or the sale of
the 25,000 shares in 1985. Richard reported the receipt of the
Wedtech shares on his Federal income tax return for 1983 at an
aggregate value of $34,931, or $0.31 a share. Richard reported
the sale of the 25,000 shares on his Federal income tax return
for 1985, showing a gain of $380,457, an aggregate basis for
those shares of $6,654 and an amount realized of $387,111.
III. Deficiencies
A. Value of Wedtech Shares
We first must determine the fair market value of the Wedtech
shares.
In August 1983, Wedtech went public by offering 1,900,000
shares of its stock to the public at $16 a share (the IPO).2
Petitioner received the shares on a date (the valuation date)
sometime between the date of the underwriter’s commitment letter
1(...continued)
conceded respondent’s defense of collateral estoppel: “The
petitioners agree that collateral estoppel does apply to most of
the facts decided in the criminal case. However, the essential
issues of intent and tax evasion were never at issue.” The
estoppel facts consist of 64 numbered paragraphs, which are
incorporated herein by this reference and found for purposes of
this case, because petitioner is estopped from denying them.
Petitioner’s fraudulent intent is not established by the estoppel
facts.
2 There is a discrepancy in the record over the date of the
IPO. We need not resolve the exact date of the IPO to determine
the fair market value of the Wedtech shares on the valuation
date.
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