- 21 -
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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