- 56 -
redemption of the taxpayer’s class A preferred voting stock by a
family-held corporation was essentially equivalent to a dividend
under section 302(b)(1) of the Internal Revenue Code of 1954. In
deciding the tax effect of the redemption, this Court addressed
the taxpayer’s argument that the redemption was pursuant to a
plan of redemption that, when fully implemented, would completely
terminate the taxpayer’s ownership interest. The evidence at
trial failed to disclose any common understanding among the
shareholders or the redeeming corporation as to the timing of, or
procedure for, the alleged redemption plan, nor was there any
evidence of a concrete plan involving the shareholders or the
corporation. After examining the record, this Court concluded
there was no credible evidence of any firm plan to redeem, noting
that “vague anticipation” was not enough to constitute a plan.
Id. at 1114.
4. Paparo v. Commissioner
In Paparo v. Commissioner, 71 T.C. 692 (1979), the taxpayers
were shareholders of Nashville Textile Corp. (Nashville) and
Jasper Textile Corp. (Jasper), two women’s apparel manufacturers,
and House of Ronnie, Inc. (Ronnie), the corporation that designed
and marketed the clothing made by Nashville and Jasper. In order
to improve their sales development effort, the taxpayers
approached I. Amsterdam, a successful sales organization. The
shareholders of I. Amsterdam also owned Denise Lingerie Co., a
Page: Previous 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 NextLast modified: May 25, 2011