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to me and I gave it to the banker after the closing and
said, Put this in a CD in the company?
A [revenue agent] I don’t remember that, but if
that had been the case you should have reported that
$400,000 under income for 1995.
Q Okay. It would have been a distribution that
would have reduced my basis. Right?
A If you had recorded the amount in income and
then contributed it to Alofs, then it would be included
in your basis in Alofs.
Q Okay. It wouldn’t have been taxable then if we
had already paid the taxes on that retained earnings,
if it came out of Excellence retained earnings, would
it not?
Suffice it to say that the foregoing record is at least
confusing, if not potentially contradictory, as to petitioners’
claims regarding the $500,000 and $400,000 amounts. The only
documentary evidence related to either item is the $400,000
check, suggesting a remittance that in form should not affect
basis in Alofs or Target. Conversely, nothing offered by
petitioners at trial or on brief is sufficiently clear to suggest
any transaction that in substance would lead to increased basis.
Respondent’s position as to these amounts is sustained.
3. $196,000 sales price reduction
A $196,000 item is also a subject of dispute in the parties’
basis computations. According to their stipulation on this
matter: “In regard to the $196,000 that the respondent did not
allow in basis for Alofs, petitioners advised that this resulted
from the reduction in the sales price of Excellence by this
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