Shannon D. Mullins - Page 10

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          letter, however, does not represent evidence of a consummation of           
          a sale of petitioner’s shares.                                              
               Petitioner and Mr. Taylor did not enter into a written stock           
          purchase agreement until October 17, 2001.  The stock purchase              
          agreement provided that Mr. Taylor would pay petitioner an agreed           
          upon purchase price on an undefined “Closing Date”.  Mr. Taylor’s           
          first payment to petitioner for his shares occurred on October              
          26, 2001, when petitioner received a check for $8,000.  The                 
          payment of the first installment of the purchase price in this              
          case is the best evidence of the sale of petitioner’s shares.               
               Accordingly, we conclude that petitioner sold his shares of            
          Edgington Mullins stock on October 26, 2001, for purposes of                
          computing petitioner’s pro rata share of the S corporation’s                
          items of income, credits, and deductions.                                   
          B.  Capital Gain or Loss From Sale of Edgington Mullins Stock               
               The gain or loss realized from the sale of property is                 
          measured by the “amount realized” less the “adjusted basis” of              
          the property sold.  Sec. 1001(a).  The amount realized consists             
          of “the sum of any money received plus the fair market value of             
          the property (other than money) received”.  Sec. 1001(b).  A                
          shareholder’s adjusted basis in his or her S corporation stock is           
          determined under section 1367, which provides a list of the                 
          positive and negative adjustments to the shareholder’s basis in             
          his or her stock for items of income, loss, and deductions of an            

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