Jerry S. Payne - Page 21

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          distributed assets of 2618 was incorrect, and he alleges that the           
          liquidation distribution to petitioner consisted of the $40,011             
          of assets shown on the yearend balance sheet in Schedule L of               
          2618's 1989 return.12                                                       
               On October 16, 2002, we issued an order directing the                  
          parties to file supplemental briefs addressing the issue of                 
          whether the cessation of business by 2618 and the assumption of             
          its business operation by JKP in November 1990 constituted, in              
          substance, a reorganization within the meaning of sections                  
          368(a)(1)(D) (“D” reorganization) and/or 368(a)(1)(F)) (“F”                 
          reorganization) rather than a taxable liquidation of 2618 subject           
          to section 331.  In response, petitioner submitted a two-page               
          statement in which he essentially reiterates his original                   
          position that he did not receive anything of value from 2618 when           
          its business operation terminated in November 1990.  Respondent             
          filed a brief in which he states that, assuming the club’s assets           
          were either owned or leased (from petitioner) by 2618 and the               
          club was being operated by 2618 rather than by petitioner                   
          “exclusively on his own behalf”, he will concede that the                   
          transfer of the club’s operation from 2618 to JKP meets all of              
          the statutory requirements for a nondivisive “D” reorganization;            
          i.e., there was a transfer by a corporation of substantially all            

               12  A 1990 return was not filed by 2618, and the record is             
          devoid of any balance sheet or other financial record for 2618              
          subsequent to Dec. 31, 1989.                                                

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