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from the stock sale to the ESOP attributable to the proceeds that
had not been reinvested in qualified replacement property; i.e.,
$121,807.
On July 20, 2001, respondent mailed petitioner a notice of
deficiency for 1996. Respondent determined that petitioner
realized a long-term capital gain of $1,406,017 as a result of
the stock sale to the ESOP. Further, respondent determined that
the gain must be included in taxable income for 1996 because
petitioner did not make a timely election under section 1042 in
order to defer the gain. On October 17, 2001, petitioner filed a
petition with the Court with respect to the notice of deficiency.
Also on October 17, 2001, respondent received a second
Federal tax return for 1996 (second tax return) from petitioner,
which included the undated signature of petitioner and the
signature of Mr. Midcap dated March 4, 1997. The second tax
return had attached a statement of election pursuant to section
1042 predated to March 4, 1997, a statement of consent from the
company consenting to the application of sections 4978 and 4979A
predated to March 4, 1997, and a statement of petitioner’s
purchase of qualified replacement property predated to March 2,
1998.
On October 29, 2001, respondent received a second amended
Federal tax return for 1996 (second amended tax return), signed
by petitioner and dated October 27, 2000, and by Mr. Midcap and
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