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the details of the transactions, did not recognize that
substantial income was omitted.
Colony, Inc. v. Commissioner, supra, upon which petitioner
relies heavily, does not support petitioner’s arguments. Colony
involved the interplay between "gross receipts" and "gross
income”. All of the receipts of a sale of real property had been
disclosed, but cost of goods sold had been overstated. Under
these circumstances, the Supreme Court held that there was not an
omission from gross income within the meaning of the applicable
statute because, in computing the 25-percent threshold, Congress
intended omission of gross income to refer to an understatement
of amount realized rather than net gain. See id. at 1038.
Our holding is consistent with the decision of this Court in
Estate of Knox v. Commissioner, T.C. Memo. 1961-129, revd. on
another issue 323 F.2d 84 (5th Cir. 1963). In Estate of Knox, a
corporation owning real property was liquidated, and the assets
were distributed to the shareholders. Because an election was
not filed within 30 days after the adoption of the plan of
liquidation, the distribution that was received by the
shareholders should have been reported as income on their
individual tax returns. The taxpayer, a 60-percent shareholder,
failed to include the distribution in income. The taxpayer
failed to report that the corporation had been liquidated on her
income tax return but attached a schedule claiming that the
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