- 56 -
The parties stipulated that the fair market value of the
stock of the four European subsidiaries was $70,627,554, which is
$17,577,252 more than $53,050,302. Thus, we conclude that the
value of the stock of the four European subsidiaries exceeded the
value of 40 percent of the Burndy-Japan stock by $17,577,252.
Burndy-US transferred the stock of FC-Spain and FC-Italy to
FCI in 1994. However, respondent contends that FCI
constructively received the stock of FC-Spain and FC-Italy in
1993. We disagree.
A shareholder does not constructively receive a dividend
during a year if the shareholder lacks an unrestricted legal
right to demand payment in that year. Bush Bros. v.
Commissioner, 73 T.C. 424, 438-439 (1979), affd. 668 F.2d 252
(6th Cir. 1982). The September 20, 1993, agreement between FCI
and Burndy-US stated that Burndy-US was to transfer the stock of
FC-Italy and FC-Spain to FCI in 1994,24 and that the transfer of
stock of FC-Italy and FC-Spain to FCI was to be effective on
January 1, 1994. FCI agreed to defer its receipt of that stock
to 1994. That stock was Burndy-US’s payment for the stock of
Burndy-Japan. Thus, FCI did not constructively receive the stock
of FC-Italy and FC-Spain in 1993.
24 Alternatively, respondent contends that FCI received a
constructive dividend from the bargain sale of that stock in
1994, a year not before us.
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