- 32 -
In arguing that only satisfaction of the primary-and-
unconditional-obligation standard as to Mr. Read may satisfy the
on-behalf-of standard in Q&A-9, petitioners seem to be suggesting
that that temporary regulation requires only that there be a
transfer of property on behalf of the nontransferring spouse
(here Mr. Read), regardless who is making the transfer of prop-
erty and to whom such property is transferred. Petitioners thus
reverse the on-behalf-of standard in Q&A-9 to read as follows: A
transfer of property by a third party to the transferring spouse
on behalf of the nontransferring spouse.21 However, Q&A-9 does
not read that way and does not address such a transfer. Q&A-9
20(...continued)
Q&A-9 and sec. 1041 are satisfied). In the case of a corporate
redemption in a divorce setting, Q&A-9 and sec. 1041 do not
address the tax consequences to the nontransferring spouse whose
stock is not being redeemed, although Q&A-9 makes it clear that
if that temporary regulation applies, the nontransferring spouse
is deemed to have immediately transferred to a third party, in a
transaction that does not qualify for nonrecognition treatment
under sec. 1041, the property that such spouse is deemed to have
received from the transferring spouse. However, neither Q&A-9
nor sec. 1041 prescribes the tax consequences to the nontransfer-
ring spouse as a result of that deemed transfer. Instead, that
tax treatment is determined by other provisions of the Internal
Revenue Code.
21The inquiry under constructive-dividend decisional law as
to whether a transfer of redemption proceeds by the redeeming
corporation to the redeeming stockholder satisfies a primary and
unconditional obligation of another stockholder is intended to
determine whether such a transfer, in substance, is (1) a payment
by the redeeming corporation of a dividend to the stockholder
whose stock is not being redeemed in an amount equal to such
redemption proceeds and (2) an immediate transfer of that same
amount by such stockholder to the stockholder whose stock is
being redeemed in payment for such stock.
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