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transferring spouse receives money from the corporation in return
for her stock. This receipt of money (especially if it repre-
sents a substantial gain as in this case) benefits the transfer-
ring spouse. Oftentimes the transfer will also generally benefit
the spouse who is the remaining shareholder. This is the same
dilemma that courts confronted in trying to determine whether a
redemption of one shareholder’s stock could ever be considered a
constructive dividend to the remaining shareholder. As a result,
the courts fashioned the primary and unconditional obligation
test that we applied in Arnes II. The fact that Ms. Read’s
transfer was simply “in the interest of” Mr. Read or that Mr.
Read received “some general benefit” is an insufficient reason
for us to conclude that Mr. Read could have a constructive
dividend. See Ingham v. United States, 167 F.3d 1240 (9th Cir.
1999), where the court explained that a transfer to a third party
would not be considered “on behalf of” the other spouse within
the meaning of Q&A-9 unless the transfer relieved the other
spouse of a “specific legal obligation or liability.” Id. at
1244. The fact that the other spouse receives “some general
benefit” is insufficient. Id.
Because Q&A-9 controls the tax treatment of both spouses, a
divorce-related corporate redemption transaction should not be
considered to be a transfer “on behalf of” the nontransferring
spouse within the meaning of Q&A-9 unless the nontransferring
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