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balance of the purchase price owed to the Nashville and Jasper
shareholders.
The sole issue for decision was whether the amounts received
by the taxpayers in 1970 and 1971 from Ronnie in exchange for
their stock in Nashville and Jasper were taxable as capital gains
under section 302,35 or as dividends under section 301. The
parties agreed that section 304 applied to the stock acquisitions
in question and that, therefore, the transfer of Nashville and
Jasper stock to Ronnie must be characterized as a redemption
through the use of related corporations. The parties disagreed
only with respect to the application of section 302. The
taxpayers contended that the redemptions qualified as sales under
section 302(a) because they met the requirements of either
section 302(b)(1) or (2). The taxpayers argued that the 1970
redemption was but one step in an overall plan to redeem their
interest in Nashville and Jasper that ended in 1972 with the
second public offering, and it was not the essential equivalent
of a dividend.
This Court rejected the taxpayers’ argument, concluding that
the record did not contain any compelling evidence of an overall
financial plan covering both the first and the second public
offerings. No formal written plan for the funding of the
35Relevant Code provisions were from the Internal Revenue
Code of 1954.
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