Rendina v. Commissioner
United States Tax Court
72 T.C.M. 474 (1996)
- Written by Heather Whittemore, JD
Facts
In 1986 Paul Rendina (plaintiff) and Thomas Ackerman formed a corporation, Wood Street Apartments, Inc. (WSAI) to construct and sell 18 condominium units. Rendina and Ackerman each spent $250 to purchase an equal number of shares in WSAI. WSAI financed the construction with a bank loan of $740,000, a cash deposit from Rendina of $41,200, and loans from three of Rendina’s clients for $53,000, $10,000, and $5,000, respectively. WSAI issued promissory notes to the clients bearing 12 percent annual interest. At the end of 1988, two condominium units had not sold. WSAI transferred the units to Rendina, and in exchange Rendina assumed the notes of the clients and agreed to let WSAI discharge its debt to him. After transferring the units, WSAI ceased doing business but did not formally dissolve until its charter was revoked in 1990. On his 1988 income-tax return, Rendina did not report gain from receiving the two condominium units. In 1989 Rendina sold one of the condominium units for approximately $68,000. The Commissioner of Internal Revenue (the Commissioner) (defendant) assessed a deficiency against Rendina of approximately $36,000 after determining the receipt of the units was a dividend from WSAI. Rendina appealed, arguing he received the units from the de facto liquidation of WSAI.
Rule of Law
Issue
Holding and Reasoning (Beghe, J.)
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