Judge Morrison has to deal with a complicated intrafamily freeze-out of the children of the founder of a closely-held C Corp. It even caused me to give Judge Morrison a Taishoff “Good Job,” a year ago. So here’s all 140 (count ’em, 140) pages of Charles G. Berwind Trust for David M. Berwind, David M. Berwind, D. Michael Berwind, Jr.; Gail B. Warden, Linda B. Shappy and Valerie L. Pawson, Trustees, et al., T.C. Memo. 2023-146, filed 12/4/23.

It’s an old story: one son took control of the business, did some merger maneuvers, and redeemed out the siblings’ shareholdings when they objected. Apparently that was the gravamen of the litigation in USDCEDPA referred to in my above-cited blogpost. There is much argy-bargy in Judge Morrison’s opinion about PA law of corporate merger, which I leave to PA practitioners. And petitioners try to relitigate the USDCEDPA case, but get nowhere.

The question here is computation of the interest on the cash payment for the redeemed stock when it was released from escrow. Section 483 imposes built-in (unstated) interest when the price for a sale or exchange is paid out over a period greater than one year, to prevent gameplaying. But intent plays no part in the statutory language.

“The text of section 483 does not require that the person who exchanges or sells property be a party to the contract for the sale or exchange of property. By its terms, section 483 operates when there is ‘a property.’ § 483(a)(1). It does not require the parties to the ‘contract for the sale or exchange . . . of the property’ to include the person who sells or exchanges the property.” T. C. Memo. 2023-144, at pp. 136-137.

Although redemption took place when the final merger was consummated in 1999, payout was deferred to 2002 because of the litigation aforesaid.

The dissenters claimed the whole payout was capital gain effective at date of merger. And they argue origin-of-claim for the buyout settlement, but the claim originated with the disputed merger.

Of course, the buyer-out claimed an interest deduction per Section 483, got rejected by IRS, sued and won in USCFC. Hence the SNODs to the dissenters, although not preclusive.

Section 483(c) controls. As there’s a one-shot payment, Section 1272(a) allocation of payments doesn’t apply.

And of course the stipulation of settlement sinks the petitioners. T. C. 2023-144, at p. 140.