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delivered to the transferee belong, whether or not the
taxpayer intends, or instructs his broker or other
agent, to sell or transfer stock from a lot purchased
or acquired on a different date or for a different
price.
(3) Identification on confirmation document. (i)
Where the stock is left in the custody of a broker or
other agent, an adequate identification is made if --
(a) At the time of the sale or transfer, the
taxpayer specifies to such broker or other agent having
custody of the stock the particular stock to be sold or
transferred, and
(b) Within a reasonable time thereafter,
confirmation of such specification is set forth in a
written document from such broker or other agent.
Stock identified pursuant to this subdivision is the
stock sold or transferred by the taxpayer, even though
stock certificates from a different lot are delivered
to the taxpayer’s transferee.
Petitioners argue that Merrill Lynch’s actions in selling
634,100 of the pledged shares “precluded [Mr. Rendall] from
making any identification at or about the time of the sale by
Merrill Lynch”, and that their “first opportunity” to identify
the shares sold was in connection with the preparation and filing
of their 1997 return. Petitioners conclude that they made
adequate identification of the shares sold on Schedule D of their
1997 return.
Respondent argues that “Mr. Rendall was well aware that
Merrill Lynch intended to sell a portion of the pledged stock to
satisfy his margin loan debt” and, “[d]espite knowing of Merrill
Lynch’s intentions * * *, petitioners made no attempt to comply
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