Glenn Hightower - Page 1

                                 T.C. Memo. 2005-274                                  

                               UNITED STATES TAX COURT                                

                           GLENN HIGHTOWER, Petitioner v.                             
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 8679-04.              Filed November 28, 2005.              

                    Petitioner (P) and Daniel O’Dowd each owned 50                    
               percent of the stock of an S corporation (GH).  O’Dowd                 
               exercised his rights under the shareholders’ agreement                 
               to buy P’s shares.  P opposed the buyout in arbitration                
               proceedings to which P and O’Dowd had agreed to be                     
               bound.  In 2000, the arbitrator ruled against P, and P                 
               received $41,585,388 in exchange for his GH stock.  P                  
               deposited the payment in an interest-bearing account.                  
               From 2000 to 2003, P unsuccessfully opposed the buyout                 
               in California State courts.                                            
                    P received no dividends from GH in 2000, but he                   
               retained the right to receive dividends and vote his                   
               shares of GH stock.                                                    
                    Held: P is taxable on the payment he received for                 
               his GH stock and related interest in the years paid.                   
                    Held, further, P is taxable on a distributive share               
               of GH’s income in 2000.                                                

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