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Docket No. 13392-01
Zalman Melnik and Lea Melnik:
Accuracy-
related penalty
Year Deficiency Sec. 6662(a)1
1997 $731,083 $146,217
Docket No. 13395-01
Moshe M. Melnik:
Accuracy-
related penalty
Year Deficiency Sec. 6662(a)
1997 $1,015,157 $203,031
The issues for decision2 are:
(1) Whether petitioners carried their burden of proving
their sale of HouTex Metals Co. (HouTex) stock to Clend
Investments Holding, Ltd. (Clend)--a foreign company owned by two
Bermuda trusts established for petitioners’ benefit--in exchange
for private annuities, was not a sham transaction lacking
economic substance;
1All section references are to the Internal Revenue Code in
effect for the year in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure. Monetary amounts are
rounded to the nearest dollar.
2Respondent asserted a second alternative position in the
notices of deficiency. Respondent determined “that due to the
transfer of appreciated stock of HouTex Metals, Inc., in 1996, a
35% excise tax is applicable on the value of the stock
transferred reduced by the present value of the annuity received
that is associated with this transfer for the 1996 taxable year
in accordance with Internal Revenue Code Section 1491.” We do
not have jurisdiction over the excise tax imposed by sec. 1491.
Freedman v. Commissioner, 71 T.C. 564 (1979).
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Last modified: May 25, 2011