Archie L. and Louise B. Honbarrier - Page 1

                                   115 T.C. No. 23                                    

                               UNITED STATES TAX COURT                                

                 ARCHIE L. AND LOUISE B. HONBARRIER, Petitioners v.                   
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

          TO COLONIAL MOTOR FREIGHT LINE, INC., Petitioner v.                         
          COMMISSIONER OF INTERNAL REVENUE, Respondent.                               

               Docket Nos.  9053-97, 9054-97.  Filed September 29, 2000.              

                    H was the sole shareholder of P.  P was engaged in                
               the business of hauling packaged freight in trucks.                    
               Its trucking operations were terminated in 1988.  By                   
               1990, P had sold its operating assets.  P invested the                 
               proceeds from the sale of its operating assets in tax-                 
               exempt bonds and a municipal bond fund.                                
                    C was a privately held trucking company that                      
               operated as a bulk carrier of chemicals.  The majority                 
               of C’s stock was owned by H.                                           
                    On Dec. 31, 1993, P was merged into C.  Pursuant                  
               to the merger, H received 17,840 shares of C stock for                 
               his P stock.  The value of the 17,840 shares was                       
               determined to be equal to the net fair market value of                 
               P’s assets.  P and H treated the merger as a tax-free                  

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