Jerry S. Payne - Page 25

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                    2.  Continuity of Business Enterprise                             
               We also reject respondent’s suggestion that JKP’s January              
          1991 sale of its assets, less than 3 months after it acquired               
          them, indicates that those assets were sold “as part of the                 
          overall plan to transfer the assets from 2618 to JKP”.  We have             
          no doubt that petitioner’s efforts on behalf of the club and his            
          investment in 2618 were motivated principally, if not                       
          exclusively, by his desire to receive, in cash, the overdue legal           
          fees from 2618 and Helmle.  His ongoing efforts to secure the               
          indispensable SOB and mixed beverage permits for the club were              
          doubtlessly motivated by a desire to make the club a readily                
          saleable property.  But, as respondent acknowledges, there is no            
          direct evidence that JKP’s actual sale of its assets was part of            
          an overall plan existing at the time of the transfer of the                 
          club’s operation from 2618 to JKP; and we do not infer the                  
          existence of such a plan by reason of the proximity in time of              
          the two transactions.  The mere fact that petitioner may have               
          contemplated selling the club at the time of its transfer from              
          2618 to JKP does not require a finding that such transfer lacked            
          COBE.  See Lewis v. Commissioner, 176 F.2d 646 (1st Cir. 1949),             
          affg. 10 T.C. 1080 (1948).  In that case, a corporation sold two            
          of its three lines of business and, because it was temporarily              
          unable to sell the third, it placed the assets of the remaining             
          business in a new corporation, pending a sale (which occurred               

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