- 45 - the sale of the RD stock, the unrelated entity, however, would have to be a securities dealer in whose hands the preferred stock would be “inventory” rather than a capital asset.14 NSI paid a $2.5 million fee to petitioner in late January 1997 for services in helping to arrange the divestment. Melissa Meder (Meder), NSI’s vice president for tax, was involved in planning and effecting NSI’s divestment of the tax benefit lease. On August 31, 1996, NSI, through a subsidiary, acquired the RD stock15 in exchange for 7,302 shares of NSI Enterprises preferred stock. The RD stock had a $100 per share liquidation preference value, was entitled to a dividend of 6.878 percent per annum, and had a “put” feature allowing the preferred stockholder to request redemption and to have that stock redeemed on or after January 1, 1999. While the preferred stock remained outstanding, RD was required to maintain investments in governmental instruments or “A”-rated bonds having a value equal to the preferred stock’s liquidation preference and accrued but unpaid dividends. On August 31, 1996, NSI transferred to NSI Enterprises the tax benefit lease and certain real estate in Decatur, Georgia (the Decatur realty). On the same date, NSI Enterprises transferred to Corisma, Inc. (Corisma), a wholly owned subsidiary 14See sec. 1221(1); see also sec. 1211(a), which prohibits a corporate taxpayer’s deduction of a capital loss against its ordinary income. 15RD was a second-tier subsidiary of Norwest Bank (Norwest).Page: Previous 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 Next
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