John Arnes (plaintiff) and his wife, Joann Arnes, formed a corporation, Moriah, and they operated a McDonald’s franchise through this corporation. John and Joann owned all stock in Moriah. John and Joann divorced. McDonald’s required franchise operators to own 100 percent of equity and profits. Accordingly, John and Joann entered into an agreement under which Moriah would redeem Joann’s 50 percent interest in the stock for $450,000 (a massive profit against the original basis), payable in monthly installments. The agreement was incorporated into the dissolution-of-marriage decree. On her federal tax return for 1988, Joann reported the portion of the $450,000 she had received that year. Later that year, she filed a claim for a refund of the amount paid on the stock redemption, citing an Internal Revenue Service (IRS) exemption from taxable gains for transfers made on behalf of a spouse in a divorce. The IRS disallowed the claim. Joann brought suit in federal district court. The court ruled in favor of Joann, finding that her transfer of stock to Moriah had been made on behalf of John. The government appealed. The federal appellate court affirmed. Meanwhile, the government had asserted a protective tax deficiency against John to ensure that someone would pay taxes on the redemption. John contested the deficiency in the United States Tax Court. Both John and the Commissioner of Internal Revenue (defendant) moved for partial summary judgment.