- 63 -
1976, the taxpayer sold all of his shares to a third party for
cash and a promissory note. Minutes of a board of directors
meeting held on July 30, 1976, described the redemption and the
subsequent sale of taxpayer’s remaining stock to a third party as
steps in the sale. The taxpayer reported the redemption proceeds
as income from the sale or exchange of stock under section
302(a).
Citing Zenz v. Quinlivan, 213 F.2d 914 (6th Cir. 1954), this
Court examined the record to determine whether the intent of the
taxpayer was to bring about a complete liquidation of his
ownership interest in his corporation. Monson v. Commissioner,
supra at 835-836. Because the record clearly established that
the redemption of the taxpayer’s stock was part of an overall
plan to terminate his entire interest in his closely held
corporation, this Court held that the redemption was either a
complete termination of the taxpayer’s interest under section
302(b)(3) or was not essentially equivalent to a dividend under
section 302(b)(1). Id. at 837. In either event, section 302(a)
required the redemption to be treated as a sale. Id.
8. Applicable Legal Principles
The above-cited cases decided by this Court confirm that
this Court has not integrated a redemption with one or more other
transactions to decide whether the requirements of section 302(b)
are met unless the redemption was part of a firm and fixed plan
Page: Previous 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 NextLast modified: May 25, 2011