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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