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1244 Stock Essay

3578 words - 15 pages

United States Tax Cases (1913-1999), [97-2 USTC ¶50,905], U.S. District Court, Dist. Ore., Dennis R. Maze and Beatrice V. Maze, husband and wife, Plaintiffs v. United States of America, Defendant , Summary judgment: Genuine issues of material fact: Capital gains and losses: Small business stock:, (Oct. 10, 1997), (Oct. 10, 1997)
[97-2 USTC ¶50,905] Dennis R. Maze and Beatrice V. Maze, husband and wife, Plaintiffs v. United States of America, Defendant
U.S. District Court, Dist. Ore., Civ. 96-1000-JE, 10/10/97
[Code Secs. 1244 and 7402 ]
Summary judgment: Genuine issues of material fact: Capital gains and losses: Small business stock: Evidence.--The government was denied summary ...view middle of the document...

C. 20530, for defendant.
Jelderks, Magistrate Judge:
Plaintiffs Dennis Maze and his wife Beatrice filed a complaint pursuant to 26 U.S.C. §7402 seeking a refund of federal income taxes paid. Plaintiffs claim that $7,698 1 was improperly collected by the Internal Revenue Service (“IRS”) in 1989. Plaintiffs assert they are entitled to a deduction against ordinary income for a loss on the worthlessness of small businessstock pursuant to 26 U.S.C. §1244. Before the court is defendant’s motion (# 26) for summary judgment.
Both parties filed concise statements of material fact pursuant to Local Rule 220-9(a) & (b). Pursuant to subsection (f) of that rule, material facts in the defendant’s concise statement that are not expressly controverted are deemed admitted.
In the spring of 1986, plaintiff Dennis Maze (“Maze”) became involved with Pacific Trailer Works, Inc., (“PTW”), a Washington corporation. Maze became involved by making an initial alleged investment of $30,000. Maze claims that he received 6,375 shares of stock for this alleged investment. At his deposition, Maze testified the share price was $4.72 for a total alleged investment of $27,000. Def. Exh. G, p. 13. Maze admitted at his deposition that the amount of money he thought he paid for stock was not reflected in the paperwork. Id. 2
In January of 1986, PTW’s board of directors adopted a section 1244 stock offer plan. Pl. Exh. 1. Defendant submitted a document called the “Corporate Record Sheet” from PTW which purportedly shows the amount of stock held by Maze pursuant to the section 1244 plan. Def. Exh. C, at 6. That document states 6,375 shares of common stock were issued to Maze on November 15, 1988. 3 However, the document is not dated.
On May 10, 1986, PTW held a special stockholder’s meeting dealing with the execution of the “ ‘Offer to Purchase Common Shares of Stock in [PTW],’ directed to ‘BBR & D, a Washington partnership. . . .’ ” Def. Concise State. at ¶4. Maze was an individual partner of BBR & D. However, the stock purchase offer provided the stock could be purchased as a block by the partnership or in equal shares by the four individual partners. Def. Exh. C, at 4. The record shows individual stock certificates were issued to the four partners of BBR & D for 6,375 shares each. Id. at 7-10. In fact, Maze stated the partnership was never formed.
At the May, 1986 meeting, Maze was also elected as a director and officer of PTW, with the authority to secure lines of credit for the corporation. Also on May 10, 1986, Maze and another listed partner of BBR & D, Richard Durban, executed the offer to purchase PTW stock. The other two partners, Milton Buswell and Robert Blancarte, executed the purchase offeron May 27 and July 14, 1986, respectively.
The stock purchase offer, through which Maze and the other partners bought the stock, provided that the purchaser 4 could buy 25,500 shares of unissued common stock at $4.31 per share....

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