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was “analogous either to interest paid to a seller to compensate
for delay in payment of a purchase price, or to rent paid for the
temporary use of income producing property.” Id. Because the
payment of either interest or rent would have been taxable as
ordinary income, the Court of Appeals for the Ninth Circuit held
that the $2,432,175.45 award was taxable to the corporation as
ordinary income.
The case of Keller St. Dev. Co. v. Commissioner, supra, is
of no help to petitioner. As discussed above, the redemption
payments at hand were not a substitute for wages. Those payments
resulted from the demand of Chrysler’s employee/shareholders that
Chrysler redeem its common stock from the ESOT at fair market
value. That demand required that Chrysler pay to the
employee/shareholders nothing more than they would have otherwise
received had they sold their Chrysler common stock to an
unrelated party on a public market.
We also held in Frederick Weisman Co. v. Commissioner,
97 T.C. 563 (1991), that section 311(a) precluded the deduction
of amounts paid to redeem stock. Section 311(a) provides:
SEC. 311(a). General Rule. -- Except as provided
in [subsection] (b), * * * no gain or loss shall be
recognized to a corporation on the distribution, with
respect to its stock, of --
(1) its stock (or rights to acquire its
stock), or
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