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C. The VeloBind Stock
At the start of 1985, Ridge owned 80,000 shares of junior
common stock in VeloBind that he had bought in 1983 for $3 per
share. In 1985, Theodore owned 7,500 shares of junior common
stock in VeloBind that he had bought in 1983 for $3 per share.
In Steiner v. Commissioner, T.C. Memo. 1995-122, we determined
that these shares converted to VeloBind common stock in 1985.
The VeloBind common stock traded at $17 per share on February 12,
1985.
In the respective notices of deficiency, respondent
determined that the Harlans4 and the Ockels5 received 1985 income
from the stock conversion.
Discussion
I. The Parties’ Contentions; Summary of Court’s Conclusion
Petitioners have properly raised in their petitions the
affirmative defense of the statute of limitations for 1985. See
Rule 39.
The parties have stipulated that the 3-year period of
limitations (sec. 6501(a)) expired for both the Harlans and the
4In the notice of deficiency, respondent determined that the
Harlans’ income from the VeloBind stock conversion was
$1,275,200. However, in respondent’s answer and on brief,
respondent asserts the correct income amount was $1,120,000.
5In the notice of deficiency, respondent determined that the
Ockels’ income from the VeloBind stock conversion was $119,550.
However, in respondent’s answer and on brief, respondent asserts
the correct income amount was $105,000.
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