- 82 -
of Mr. Read and Mrs. Read.5
It has been difficult to reach consensus about how to write
up this case, much less decide it, because one or another of four
different approaches might be used to determine the relationship
of the “on behalf of” and “primary and unconditional obligation”
standards. A summary and comment follow on each of the possible
approaches.
(1) My continuing view is that the “primary and uncondi-
tional obligation” standard of traditional redemption tax law and
the “on behalf of” standard of Q&A-9 should be construed and
applied consistently; redemption tax law should govern the
interpretation and application of the “on behalf of” standard.
The correct application of this view in the case at hand would
result in no taxable income to Mr. Read because he never had the
primary and unconditional obligation to purchase the stock; he
was entitled under both the settlement agreement and the divorce
decree to lay his purchase obligation off on MMP, which he did.
See Enoch v. Commissioner, 57 T.C. 781 (1972); Kobacker v.
Commissioner, 37 T.C. 882 (1962); Rev. Rul. 69-608, 1969-2 C.B.
43, 44 (Situation 6). Furthermore, MMP became primarily and
unconditionally obligated to purchase and pay for the stock,
notwithstanding that Mrs. Read became entitled to Mr. Read’s
5 Cf., e.g., Baptiste v. Commissioner, 100 T.C. 252 (1993),
revd. 29 F.3d 433 (8th Cir. 1994), affd. 29 F.3d 1533 (11th Cir.
1994).
Page: Previous 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 NextLast modified: May 25, 2011