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participating partner’s position. That continuing interest does
not alter the controlling fact that, in 2000, Mr. Winn and Mr.
Curtis disposed of their partnership interests in Countryside in
exchange for nonmarketable securities.27 Moreover, the fact that
Stone Ends required an additional infusion of capital in 2001
before it could purchase the Manchester property from Countryside
at the agreed-upon purchase price negates the idea, suggested by
respondent, that there was a “done deal” for the sale of that
property to Stone Ends in 2000, even assuming that the parties
had reached an informal agreement regarding the terms and
conditions of sale during that year. See Chisholm v.
Commissioner, supra at 15 (agreement to exercise option “was
legally a nullity” since it did not correspond to the terms of
the option contract requiring payment, and not merely a promise
to pay, for exercise). Under the circumstances, we do not see
how respondent’s position could be enhanced by additional
discovery regarding the existence of an informal agreement for
the sale of the Manchester property in 2000.
27 Respondent also attempts to distinguish Hobby v.
Commissioner, 2 T.C. 980 (1943), on the basis of our emphasizing
in Hobby that the taxpayer did not cosign or guarantee the loans
to his friends that enabled them to purchase his shares, whereas
Mr. Winn did guarantee the loans used to purchase the AIG notes.
In Hobby, however, the taxpayer received cash for his shares, and
it was important to find that that cash came from the purchasers,
not the redeeming corporation, a finding that would have been
compromised if, in substance, the taxpayer had financed the
purchase of his own shares; i.e., had, in effect, used his
friends as conduits to deliver his shares to the redeeming
corporation in exchange for cash. In this case, Mr. Winn’s
guaranties helped to finance Countryside’s (and MP’s) acquisition
of nonmarketable securities, his receipt of which does not
trigger taxable gain under sec. 731(a)(1).
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Last modified: March 27, 2008