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remain a member of UNB’s board of directors. UNB valued the
6,842 shares of UBI stock at $692,495.8
OPINION
Section 1001(a) provides that the gain from the sale or
other disposition of property shall be the excess of the amount
realized therefrom over the taxpayer’s adjusted basis in the
property. Section 1001(b) defines the amount realized from the
sale or other disposition of property as the sum of any money
plus the fair market value of property received. See also sec.
1.1001-1(a), Income Tax Regs. The amount realized includes the
amount of liabilities from which the transferor is discharged as
a result of the transaction. See sec. 1.1001-2(a)(1), Income Tax
Regs.
Respondent determined that Mr. Friedland had a gain on the
transfer of the 6,842 shares of the pledged stock to UNB.9
Respondent argues Mr. Friedland had an amount realized equal to
the value of the 6,842 shares of the pledged stock he transferred
to UNB in 1992 to obtain UNB’s release of Mark, petitioners’ son,
from his guaranty and UNB’s forgiveness of the Centrum loans.
8 UNB management considered this amount to be the fair
market value of the stock.
9 Respondent concedes that in calculating petitioners’ gain
pursuant to sec. 1001(a), they are entitled to a $5 per share
basis in the UBI stock. This concession is relevant, however,
only if we conclude that Mr. Friedland had an amount realized on
the transfer of this stock.
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