Lenward C. Hood and Barbara P. Hood - Page 11




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          adopt the approach used by the Court of Appeals over the approach           
          used by this Court in Jack’s Maintenance Contractors, Inc.7                 
          Petitioners, of course, believe that Jack’s Maintenance                     
          Contractors, Inc. was decided correctly by this Court and urge us           
          to follow it.8                                                              
               Upon reconsideration of our opinion in Jack’s Maintenance              
          Contractors, Inc., and its reversal by the Court of Appeals, we             


               7 Respondent concedes that this Court is not bound by the              
          decision of the Court of Appeals for the Fifth Circuit, as the              
          appeals of the instant cases lie elsewhere.  See Peat Oil & Gas             
          Associates v. Commissioner, 100 T.C. 271, 274 (1993), affd. sub             
          nom. Ferguson v. Commissioner, 29 F.3d 98 (2d Cir. 1994); Golsen            
          v. Commissioner, 54 T.C. 742, 757 (1970), affd. 445 F.2d 985                
          (10th Cir. 1971).                                                           
               8 Petitioners also argue that HIF had a business purpose in            
          paying the legal fees because it was potentially liable, as a               
          transferee or successor of the sole proprietorship, for the                 
          deficiencies and penalties resulting from the Hoods’ failure to             
          report income of the sole proprietorship.                                   
               We believe HIF’s exposure to transferee liability was                  
          insignificant.  Petitioners’ reliance on Bingham v. Goldberg.               
          Marchesano. Kohlman. Inc., 637 A.2d 81, 89-90 (D.C. 1994), for              
          the proposition that HIF would have been liable under State law             
          as a transferee of the sole proprietorship as a “mere                       
          continuation” is misplaced.  That case makes clear that under               
          District of Columbia law transferee liability is not imposed                
          under the “mere continuation” standard where the predecessor                
          remains in existence, as is the case here with Mr. Hood.                    
          Moreover, Mr. Hood was able to, and in fact did, pay the                    
          deficiencies and additions to tax posited as the basis for HIF’s            
          purported transferee liability.                                             
               In any event, any business purpose premised upon the                   
          speculative possibility of HIF’s transferee liability pales in              
          comparison to the central business purpose argued in Jack’s                 
          Maintenance Contractors, Inc. v. Commissioner, supra, and the               
          instant cases; namely, the benefit of staying in business.                  





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