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LARO and MARVEL, JJ., dissenting: The majority holds today that
section 1.1041-1T(c), Q&A-9 (Q&A-9), Temporary Income Tax Regs., 49
Fed. Reg. 34453 (Aug. 31, 1984), permits a spouse1 to avoid recogniz-
ing gain which she realized from a redemption of her stock in connec-
tion with her divorce. Because we do not believe that section 1041,
either textually or as interpreted in Q&A-9, applies to stock redemp-
tions incident to divorce, we respectfully dissent.
We summarize the critical facts of this case as follows.
In connection with his divorce from Ms. Read, Mr. Read agreed to
purchase Ms. Read’s stock in MMP at a stated price, or, at his
election, to cause MMP to redeem Ms. Read’s stock. Mr. Read elected
under the terms of their divorce judgment to cause MMP to redeem the
stock in his stead. MMP authorized the redemption and entered into a
binding stock purchase agreement with Ms. Read. Pursuant to that
agreement, in 1986, MMP redeemed Ms. Read’s stock, paid Ms. Read
$200,000 toward the redemption price, and issued Ms. Read a promis-
sory note representing the balance of the redemption price. MMP paid
Ms. Read $50,000 of the promissory note’s principal during each year
in issue.
The majority concludes that Ms. Read is not taxable on the
subject gains resulting from her transfer of stock to MMP. The
majority reasons that “Q&A 9 applies to Ms. Read’s February 5, 1986,
transfer of MMP stock and * * *, pursuant to section 1041(a), no gain
1 We use the term “spouse” to include both a spouse and a
former spouse.
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