Carol M. Read, et al. - Page 94




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        nontransferring spouse is taxed on the third party transfer; it does          
        not specify when this tax arises.  If, in fact, section 1041 applies          
        to the redemption, as the majority concludes, then, under general             
        income tax principles, Mr. Read is treated as receiving a dividend            
        which arguably is taxable to him in 1986, the year of the redemption,         
        rather than in the years in issue as held by the majority.  See secs.         
        301(a), (b)(1), (c), and (d) and 302(d).  See generally Bittker &             
        Eustice, Federal Income Taxation of Corporations and Shareholders,            
        par. 8.23 (1999 Cum. Supp. 1).2  Thus, under this argument, Mr.               
        Read’s dividend is taxable to him in a year that most likely is               
        closed by the section 6501 period of limitations.  Under the major-           
        ity’s analysis, therefore, the Government may be faced once again             
        with the very same “whipsaw” that Congress intended to remedy through         
        the enactment of section 1041.  Although the majority sidesteps this          
        issue in this case by holding that Mr. Read conceded his tax liabil-          
        ity as to the subject payments, that “concession” only applies to the         
        subject years.  We see no judicial or equitable reason why Mr. Read           
        will be precluded from arguing in the future that the payments which          
        he receives on the promissory note in other years (with the exception         



               2 We note that the installment method of sec. 453 does not             
          apply to the receipt of a distribution taxed as a dividend under            
          sec. 301.  The installment method may be used only to report                
          “income” from a “disposition of property”, sec. 453(a) and                  
          (b)(1), and a “distribution of property” under sec. 302(d) does             
          not meet that requirement, see Cox v. Commissioner, 78 T.C. 1021            
          (1982); see generally Bittker & Eustice, Federal Income Taxation            
          of Corporations and Shareholders, “Distributions of Corporation’s           
          Own Obligations”, par. 8.23 at 8-83 to 8-84 (1999 Cum. Supp. 1).            




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