- 22 -
The only issue that we decided in Hayes v. Commissioner,
supra, was whether the redemption by JRE, Inc. (JRE), a corpora-
tion owned by the taxpayer Ms. Hayes and the taxpayer Mr. Hayes
who was her former spouse,9 of Ms. Hayes’ JRE stock resulted in a
constructive dividend to Mr. Hayes. The role of the Commissioner
of Internal Revenue (Commissioner) in Hayes, like respondent’s
role in the instant cases, was that of a stakeholder. Nonethe-
less, the Commissioner argued in Hayes v. Commissioner, supra,
that the tax incurred as a result of the redemption of Ms. Hayes’
JRE stock should be borne by Mr. Hayes. That was because,
according to the Commissioner, JRE's redemption of Ms. Hayes'
stock constituted a constructive dividend to Mr. Hayes since at
the time of that redemption he had a primary and unconditional
obligation to buy that stock from her. See id. at 597. On the
facts presented, we held that Mr. Hayes received a constructive
dividend as a result of that redemption because when JRE redeemed
Ms. Hayes’ JRE stock it satisfied Mr. Hayes' primary and uncondi-
tional obligation to purchase that stock from Ms. Hayes. See id.
at 605. Having so held, we stated:
Respondent has indicated to the Court that, if we
find that Mr. Hayes received a constructive dividend in
connection with JRE's undertaking to redeem Ms. Hayes'
stock, as we have done, she will concede that section
1041 shields Ms. Hayes from recognition of gain on the
amount realized from the exchange of her stock. Ac-
9We had consolidated the cases of Ms. Hayes and Mr. Hayes
for trial, briefing, and opinion.
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