- 31 -
to apply in the instant cases in order to determine whether Ms.
Read’s transfer of her MMP stock to MMP was a transfer of prop-
erty by the transferring spouse (Ms. Read) to a third party (MMP)
on behalf of the nontransferring spouse (Mr. Read) within the
meaning of Q&A-9.19 We further hold that the primary-and-
unconditional-obligation standard is not an appropriate standard
to apply in any case involving a corporate redemption in a
divorce setting in order to determine whether the transfer of
property by the transferring spouse to a third party is on behalf
of the nontransferring spouse within the meaning of Q&A-9.20
19Consequently, we need not resolve the parties’ dispute
over whether the primary-and-unconditional-obligation standard is
satisfied as to Mr. Read.
20Our holdings that the primary-and-unconditional-obligation
standard is not an appropriate standard to apply under Q&A-9 in
the instant cases, or in any case involving a corporate redemp-
tion in a divorce setting, do not disturb constructive-dividend
decisional law. That law applies the primary-and-unconditional-
obligation standard in order to determine in the case of a
corporate redemption the tax consequences to a stockholder whose
stock is not being redeemed and who is analogous to the nontrans-
ferring spouse under Q&A-9 and sec. 1041 in the case of a corpo-
rate redemption in a divorce setting. Constructive-dividend
decisional law does not apply the primary-and-unconditional-
obligation standard to determine the tax consequences to the
stockholder whose stock is being redeemed and who is analogous to
the transferring spouse under Q&A-9 and sec. 1041 in the case of
a corporate redemption in a divorce setting. In contrast, sec.
1041 prescribes the tax consequences to the transferring spouse
of a transfer of property by that spouse to the nontransferring
spouse. Q&A-9 addresses a transfer of property by the transfer-
ring spouse to a third party on behalf of the nontransferring
spouse. In the case of such a transfer, Q&A-9 and sec. 1041
provide nonrecognition treatment to the transferring spouse whose
stock is being redeemed (provided that the other requirements of
(continued...)
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