- 26 -
determined that Ms. Blatt realized and must recognize long-term
capital gain as a result of that redemption. See id. Ms. Blatt
took the position in Blatt v. Commissioner, supra, that the
redemption of her stock by Phyllograph qualified as a transfer of
property to a third party on behalf of Mr. Blatt under Q&A-9 that
is not taxable to her under section 1041(a). See id. at 80. In
support of her position, Ms. Blatt relied principally on Arnes v.
United States, supra.14 We rejected Ms. Blatt's position and
14The issue in Arnes v. United States, supra, was whether
the redemption of Ms. Arnes’ Moriah stock pursuant to the divorce
decree involved there constituted a transfer of property by Ms.
Arnes, the taxpayer before the Court of Appeals for the Ninth
Circuit in that case, to a third party on behalf of Mr. Arnes
within the meaning of Q&A-9. The Court of Appeals for the Ninth
Circuit, the court to which an appeal in Ms. Read's case would
normally lie, noted, inter alia, that "Generally, a transfer is
considered to have been made 'on behalf of' someone if it satis-
fied an obligation or a liability of that person." Id. at 459.
On the facts presented, that court held that the transfer by Ms.
Arnes of her Moriah stock to Moriah "did relieve John [Mr. Arnes]
of an obligation", id., and that that transfer constituted a
transfer to a third party on behalf of Mr. Arnes under Q&A-9, see
id.
In Ingham v. United States, 167 F.3d 1240 (9th Cir. 1999),
the Court of Appeals for the Ninth Circuit revisited the meaning
of the phrase "transfer of property to a third party on behalf of
a spouse" in Q&A-9. In Ingham, the Court of Appeals rejected the
taxpayer's expansive definition of that phrase, which included
"all transfers of property that result in a substantial benefit,
in any form, to the nontransferring or former spouse", because it
found such a definition to be inconsistent with Arnes v. United
States, supra. According to the Court of Appeals in Ingham v.
United States, supra at 1244:
The focus of the court's analysis in Arnes [v. United
States, supra] was not whether the plaintiff's [trans-
ferring spouse's] former husband had received some
general benefit as a result of the plaintiff's transac-
(continued...)
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