- 20 -
2. Louise Major’s Income
In support of respondent’s position, respondent provided
Form 1099-B and the declaration of Marlene Mills, a Mellon
employee, evidencing that in 2001 Louise Major received
$18,037.50 of demutualization11 income in the form of cash and
Form 1099-INT, reflecting interest income of at least $343.58.
Louise did not appear at trial. While Terry was present at
trial, he did not offer any evidence contesting Louise’s
deficiency or addition to tax.12 Thus, respondent’s
determination of Louise’s deficiency is sustained.
11 Demutualization, as it applies here, is the process of
converting from a mutual insurance company to a stock company
pursuant to a written plan of conversion. Prior to Oct. 26,
2001, Louise had an interest in an insurance policy administered
by Principal Financial Group, Inc., a mutual insurance company.
On Oct. 26, 2001, Principal Financial Group, Inc.’s initial
public offering became effective. Demutualization of the company
also became effective on this same date. On Dec. 10, 2001,
Mellon distributed demutualization compensation to the former
Principal Financial Group, Inc. policyholders. Former policy
holders could choose to receive their demutualization
compensation in the form of Principal Financial Group, Inc.
common stock, cash, or policy credits. As stated above, Louise
received $18,037.50 in cash as demutualization compensation.
12 In petitioners’ pretrial memorandum and in an objection
to stipulation #9 in the Stipulation of Facts, they contended
that the amounts received from Mellon should be treated as a
return of premium or excess premium and, thus, not income.
Petitioners also confirmed that Louise received these amounts in
cash. However, since petitioners did not argue this assertion on
brief or at trial, the Court deems that petitioners have
abandoned it.
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011