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.
Held:
1. The sale and redemption of the H Corp. stock
qualifies as a termination redemption under sec.
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