- 74 - tion is in satisfaction of the buyer’s obligation to surrender for redemption stock that, actually, in Wall, or constructively, in Sullivan, he had purchased from the seller. Any transfer by the seller directly to the corporation would, under that logic, be on behalf of the buyer. Contrariwise, if the remaining shareholder has not purchased the seller’s stock, and has no obligation to do so, as in Edenfield v. Commissioner, supra, the transfer to the corporation should not be viewed as on the remaining shareholder’s behalf. Since there is no practical difference between the Wall and Edenfield type formats, the choice of form by the parties to the transaction plays a dominant role in determining the income tax consequences that will follow, and the crucial distinction is whether the corporation satisfies a legal obligation of the remaining shareholder to purchase the redeemed stock. No matter how close a taxpayer comes to under- taking a legal obligation to purchase the redeemed stock, the Wall principle should not apply unless that obligation was in fact undertaken. Thus, in S.K. Ames, Inc. v. Commissioner, 46 B.T.A. 1020 (1942), we construed a contract to purchase stock that provided that the taxpayer would “purchase or cause to be purchased” the stock. We held that the promise to “purchase or cause to be purchased” provided several methods for satisfying the obligation created under the contract, and, therefore, the taxpayer incurred no absolute obligation to purchase the stock.Page: Previous 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 Next
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