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capital gain under section 356(a)(1)(B) and (2).15 That argument
depends upon a finding that the $40,011 of assets listed on the
1989 return balance sheet continued to exist in November 1990,
and were, in fact, distributed to petitioner at that time.
Petitioner denies that he received any distribution from 2618 in
connection with its transfer of the club to JKP.
Respondent simply states that the assets reflected on the
1989 return balance sheet “must have gone somewhere, and the only
logical recipient would be the petitioner as the sole owner of
the stock of * * * [2618].” A more plausible argument (and a
reasonable inference) is that such assets (assuming they still
existed in November 1990) were transferred to JKP as part of
2618's transfer of the operation of the club. That is certainly
true with respect to such business-related assets as
“inventories” (presumably consisting of food and liquor)
($4,175), current accounts receivable ($1,296), and “depreciable
assets less accumulated depreciation” ($8,647) (an asset the very
15 As we have previously noted in discussing the
constructive dividend issue (section II, supra), petitioner had a
zero basis for his 2618 stock, and respondent concedes that 2618
was without earnings and profits on the date of the alleged
distribution. Under such circumstances, sec. 356(a)(1)(B)
provides for gain recognition up to the “sum of * * * money and
the fair market value of * * * property” distributed, and sec.
356(a)(2) provides that “the gain recognized * * * shall be
treated as gain from the exchange of property.” Because
petitioner’s holding period for his 2618 stock exceeded 12 months
as of November 1990, such gain would be long-term capital gain.
See Gross v. Commissioner, 23 T.C. 756, 768 (1955), affd. 236
F.2d 612 (2d Cir. 1956).
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