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guaranty--his secondary obligation–-and a pledge of the redeemed
shares to secure the satisfaction of MMP’s obligation. See
Bennett v. Commissioner, 58 T.C. 381 (1972); Edenfield v. Commis-
sioner, 19 T.C. 13 (1952).
The Reads’ settlement agreement and divorce decree, which
tied the amounts of Mr. Read’s obligation to make periodic
alimony payments to initial and continued compliance with the
provisions for payment for Mrs. Read’s stock, did not saddle Mr.
Read with the primary and unconditional obligation to purchase
and pay for Mrs. Read’s stock.6 The obligation to purchase and
pay for her stock was assigned to and assumed by MMP as its
primary and unconditional obligation.
(2) Judges Laro and Marvel believe that Q&A-9 just does not
apply to redemptions. Adoption of this approach could cause both
individual parties to a redemption of the stock of a divorcing
spouse to incur tax liability if they are not well advised. In
most cases the departing shareholder ex-spouse would recognize
capital gain on the transaction that terminates his or her stock
6 Even if the standard espoused by Judges Ruwe and Halpern
and the writer should be adopted, a Judge adopting that standard
might conclude that Mr. Read did not divest himself of the
primary and unconditional obligation to purchase Mrs. Read’s
stock. The ground of that conclusion, with which the writer
would disagree, is that the integration of and reciprocal
relationship between Mr. Read’s alimony obligations and MMP’s
continuing obligation to complete the scheduled payments in
satisfaction of the obligation to purchase Mrs. Read’s stock left
Mr. Read with the primary and unconditional continuing obligation
to purchase her stock.
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