- 308 -
For all these reasons, we hold that for Federal income tax
purposes Jean True sold her stock on June 30, 1994, and her
partnership (and LLC) interests on July 1, 1994.89
III. Sections 483 and 1274 Do Not Prevent Below-Market Loan
Treatment Under Section 7872
The deferred payment arrangement allowed 3 months to pass
between the dates Jean True’s sales were completed for tax
purposes and the payment date. For this reason, respondent
asserts that the deferred payment arrangement should be
considered to be a loan (from Jean True to her sons) of the
$13,298,978 sales price for that 3-month period. Because Jean
True did not charge or receive any interest on this amount,
respondent further asserts that the deferred payment arrangement
was a below-market gift loan to which section 7872 applies.
Petitioners argue that even if Jean True’s sales were
completed on the notice dates (as we have decided), section 7872
cannot apply to the deferred payment arrangement. The buy-sell
agreements required Jean True’s sales to be consummated within 6
months after the notice dates. As a result, if the deferred
payment arrangement were a “contract for the sale or exchange of
89Respondent maintains that Jean True sold all her interests
on June 30, 1994. We disagree. Jean True did not give notice of
her desire to sell her partnership (and LLC) interests until July
1, 1994. Until she gave notice, she was not required to sell,
and her sons were not required to buy, those interests. Also,
the buy-sell agreements defined the effective date of the sale of
her interests as the notice dates. For these reasons we conclude
that the sale of Jean True’s partnership (and LLC) interests
occurred on July 1, 1994, as stated in the text.
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