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petitioners cannot sustain. See Bernardo v. Commissioner, supra
at n.7.
II. Attribution to Mr. Rendall of the Sale Proceeds From
Merrill Lynch’s Sale of Pledged Solv-Ex Common Stock
On brief, petitioners argue that, because Merrill Lynch sold
634,100 of the pledged shares “for their own purposes” (i.e.,
“for Merrill Lynch’s protection of their massive short
position”), the income from that sale is taxable to Merrill
Lynch. Petitioners further argue that because those shares had
been reissued in Merrill Lynch’s name before their sale by
Merrill Lynch, Merrill Lynch “should bear the tax consequences on
such sale.” Petitioners discount the fact that the shares were
acquired by Merrill Lynch pursuant to the pledge agreement on the
ground that that agreement “was fraudulently procured in light of
all the facts.”
In response to petitioners’ arguments, respondent argues
that: (1) The pledge agreement was valid; (2) under it, Mr.
Rendall, as pledgor, retained ownership of the pledged shares;
(3) the proceeds from the sale of pledged shares were used to
discharge Mr. Rendall’s indebtedness to Merrill Lynch and,
therefore, benefited Mr. Rendall; and (4) any reissuance of
pledged shares in Merrill Lynch’s name was “done to facilitate
Merrill Lynch’s sale [of the shares] as pledgee”, not to transfer
ownership of the pledged shares to Merrill Lynch. Respondent
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