Gerald A. and Henrietta V. Rauenhorst - Page 21




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          2002-30-004 (July 26, 2002).8  Moreover, the Commissioner has in            
          a private letter ruling dismissed the statements made in Blake v.           
          Commissioner, supra at 480-481, as “dicta”, and stated that “Rev.           
          Rul. 78-197 remains in effect, however” despite the statements              
          made in that case.  See Priv. Ltr. Rul. 1994-13-020 (Apr. 1,                
          1994), which states in relevant part:                                       
                    In Rev. Rul. 78-197, 1978-1 C.B. 83, the Internal                 
               Revenue Service announced that it will treat the                       
               proceeds of a redemption of stock under facts similar                  
               to those in Palmer v. Commissioner, 62 T.C. 684 (1974),                
               acq. on this issue 1978-2 C.B. 2, aff’d on another                     
               issue, 523 F.2d 1308 (8th Cir. 1976), as income to the                 
               donor only if the donee is legally bound or can be                     
               compelled by the corporation to surrender the shares                   
               for redemption.  In Palmer the taxpayer-donor had                      
               voting control of both a corporation and a tax-exempt                  
               private foundation.  Pursuant to a single plan, the                    
               taxpayer donated shares of the corporation to the                      
               foundation and then caused the corporation to redeem                   
               the stock from the foundation.                                         
                    In Blake v. Commissioner, 697 F.2d 473 (2nd Cir.                  
               1982), the court, in dicta, questioned the Service’s                   
               acquiescence in Palmer in Rev. Rul. 78-197, suggesting                 
               that a mere understanding between the contributing                     
               shareholder and the charity concerning the fact that                   
               the contributed stock would be redeemed should be                      
               enough to treat the shareholder as having received                     
               redemption proceeds.  Rev. Rul. 78-197 remains in                      
               effect, however.                                                       
                    Although in the case at hand there is some                        
               expectation that C will sell the farm items at such                    

               8Private letter rulings may be cited to show the practice of           
          the Commissioner.  See Rowan Cos., Inc. v. United States, 452               
          U.S. 247, 261 n.17 (1981); Hanover Bank v. Commissioner, 369 U.S.           
          672, 686-687 (1962); Estate of Cristofani v. Commissioner, 97               
          T.C. 74, 84 n.5 (1991); Woods Inv. Co. v. Commissioner, 85 T.C.             
          274, 281 n.15 (1985); Thurman v. Commissioner, T.C. Memo. 1998-             
          233.                                                                        





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