- 92 -
of” him. In Blatt, we held that the redemption of Ms. Blatt’s stock
pursuant to a divorce decree was not on behalf of Mr. Blatt because
Ms. Blatt failed to prove the redemption satisfied an obligation of
his. See Blatt v. Commissioner, 102 T.C. at 81-82. We set forth an
example on the top of page 81, wherein we stated that Q&A-9 operates
when “H owes a debt to a bank, and W, as part of a divorce settle-
ment, transfers her unencumbered appreciated stock to the bank in
discharge of H’s debt.” We stated that the redemption in Blatt was
outside of Q&A-9 because “The redemption, in form, was a transaction
between petitioner [Ms. Blatt] and corporation; she transferred her
stock to corporation in exchange for its appreciated value in cash.
* * * A transfer that satisfies an obligation or a liability of
someone is a transfer on behalf of that person”. Id.
The only reported opinion in which this Court has decided
whether a corporate redemption incident to a divorce qualified for
nonrecognition treatment under section 1041 is Blatt. There, as
mentioned above, we held that the redemption did not qualify under
Q&A-9. We recognized that the Court of Appeals for the Ninth Circuit
had afforded nonrecognition treatment to a spouse who had transferred
her shares to a corporation pursuant to a divorce, see Arnes v.
United States, 981 F.2d 456 (9th Cir. 1992), but we stated that we
disagreed with the opinion of the Court of Appeals for the Ninth
Circuit. We stated in Blatt that “any putative benefit to [Mr.]
Blatt [the nontransferring spouse], such as relief from a possible
claim under marital property distribution laws, does not mean that
Page: Previous 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 NextLast modified: May 25, 2011