Richard E. and Mary Ann Hurst - Page 1

                                   124 T.C. No. 2                                     

                               UNITED STATES TAX COURT                                

                    RICHARD E. AND MARY ANN HURST, Petitioners v.                     
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 15792-02.              Filed February 3, 2005.              

                    In 1997, as part of their retirement planning, Ps                 
               sold their stock in R Corp. to H Corp.  H Corp.                        
               redeemed 90 percent of P-husband’s stock in H Corp.,                   
               and P-husband sold the remainder to his son and two                    
               third parties.  Both the redemption and stock sales                    
               provided for payment over 15 years and were secured by                 
               the shares of stock being redeemed or sold.  Ps                        
               continued to own H Corp.’s headquarters building, which                
               they leased back to H Corp.  P-wife continued to be an                 
               employee of H Corp. after the redemption, and she and                  
               her husband continued to receive medical insurance                     
               through her employment.  All the agreements--stock                     
               purchase and redemption, lease, and employment                         
               contract--were cross-collateralized by P-husband’s H                   
               Corp. stock and contained cross-default provisions.                    
                    1.  The sale and redemption of the H Corp. stock                  
               qualifies as a termination redemption under sec.                       

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