Glenn H. and Diane J. Flood - Page 19




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          Hammontree’s 50-percent ownership in Glenwood.  Around that time,           
          petitioner’s basis in his Glenwood shares was $13,914.                      
               On April 25, 1989, petitioner and Hammontree personally                
          guaranteed a loan in Glenwood’s name for $43,080 which was                  
          secured by Glenwood’s operating assets.  On April 26, 1989, in              
          accord with the original agreement of petitioner and Hammontree,            
          petitioner received a $29,788.59 payment from Glenwood.  It was             
          their understanding that the $29,788.59 paid to petitioner was              
          Hammontree’s payment for one-half of the shares in Glenwood.                
               In a July 1992 purchase of petitioner’s remaining 50-percent           
          interest in Glenwood, Hammontree used corporate funds to finance            
          a portion of the transaction, showing a pattern in the way                  
          petitioner and Hammontree orchestrated their affairs.                       
          Considering the record as a whole, the $29,788.59 payment was a             
          payment from Hammontree for petitioner’s interest in the                    
          business.4  Accordingly, we hold that the $29,788.59 payment was            
          not a corporate distribution to petitioner and that it was from             
          Hammontree.5                                                                






               4 We are not required here to consider what effect                     
          Hammontree’s withdrawal of $29,788.59 from Glenwood had on                  
          Hammontree’s tax situation.                                                 
               5 The extent to which our holding has any effect on                    
          petitioner’s basis in Glenwood’s stock should be determined by              
          the parties under Rule 155.                                                 




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