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traded “the regular way” and “as new ‘when issued’” stock.9
According to petitioner, he was obligated to accept lower priced,
when-issued shares, which obligation constituted a liability and
reduced the value of the Nortel stock distribution.
Again, we disagree. Petitioner has introduced no evidence
to establish that he received when-issued shares pursuant to the
Nortel stock distribution, let alone that the value of his shares
was somehow lessened. Moreover, petitioner has not shown that
this so-called liability was a corporate liability that
petitioner assumed or a liability to which the property was
subject immediately before and after the distribution. See sec.
301(b)(2). To the contrary, the record clearly demonstrates that
petitioner received a stock dividend includable at its fair
market value in his gross income. See secs. 61(a)(7), 301(a),
(b), and (c)(1), 316(a).
II. Section 6662(a) Accuracy-Related Penalty for Substantial
Understatement of Tax
If any portion of an underpayment of tax required to be
shown on a taxpayer’s return is attributable to any substantial
8(...continued)
It is not clear whether the reference to BCE stock was a mistake
or whether petitioner was arguing that the value of the BCE stock
affected the Nortel stock he received. In any event, the lack of
clarity does not change the conclusion we reach.
9In Walker v. Commissioner, 35 B.T.A. 640, 645 (1937), we
explained that “Dealings in stock on a ‘when issued’ basis are
not sales of stock, but merely sales of contracts to sell stock
which are made on the express condition that no delivery and
payment are required unless and until the stock is issued.”
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Last modified: May 25, 2011