-396-
stock is imputed to the grantor trusts under section
318(a)(3)(B)(i).153 It follows that the grantor trusts’ sale of
Cashmere stock to Waco constituted a sale to a related person for
purposes of section 453(f)(1)(A). When Waco subsequently, within
2 years, transferred the Cashmere stock to Equity before paying
the grantor trusts for the Cashmere stock, the installment method
of reporting was no longer available to the grantor trusts (and
Kanter) by virtue of section 453(e)(1). In sum, the entire
amount Waco realized upon its sale of Cashmere stock to Equity
(the second disposition) is treated as received by the grantor
trusts at the time of the second disposition. Thus, we sustain
respondent’s determination that Kanter was not eligible for
installment sale reporting.
Issue XIII. Whether Kanter Is Entitled to Research and
Development and Business Expense Deductions Related
to Immunological Research Corp. for 1979 (STJ
report at 147-163)154
In an amendment to answer, filed November 6, 1989,
respondent asserted the Kanters were liable for an increased
153 Alternatively, under Issue V supra, we concluded Kanter
was the grantor of the Bea Ritch Trusts under the grantor trust
provisions. Attributing the Waco stock held by the Bea Ritch
Trusts to Kanter, see sec. 318(a)(2)(B)(ii), it follows that
Kanter’s ownership of the Waco stock also is attributed to
Kanter’s grantor trusts under sec. 318(a)(3)(B)(ii). Thus, Waco
and the grantor trusts are considered related persons under sec.
453(f)(1)(A).
154 The Court’s disposition of this issue represents in
large measure a wholesale adoption of the recommended findings of
fact and conclusions of law set forth in the STJ report.
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