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determination that the transaction was used principally as a
device. Id. Factors that are relevant in weighing the strength
of the business purpose include: (1) The importance of achieving
the purpose to the success of the business; (2) the extent to
which the transaction is prompted by a person not having a
proprietary interest in either corporation, or by other outside
factors beyond the control of the distributing corporation; and
(3) the immediacy of the conditions prompting the transaction.
Sec. 1.355-2(d)(3)(ii)(A),(B) and (C), Income Tax Regs. As
reflected in our findings of fact, two strong corporate business
purposes for the spin-off are present in this case. If Mr.
Deckard had carried out his plans to build and operate a funeral
home in Oblong in competition with Homes it would have divided
the funeral business in that area, thus having an adverse impact
on Homes' profits. In addition, the services of an experienced
funeral director and key employee (Mr. Deckard) would have been
lost to the Homes organization. These purposes were vitally
important to the continued success of Homes' business. The
transaction was prompted by the actions of Mr. Deckard, who had
no proprietary interest in Homes at that time. The immediate
possible threat of competition to Homes in Oblong prompted the
transaction.
Independent Corporate Business Purposes
Section 1.355-2(b)(1), Income Tax Regs., provides an
affirmative requirement that a spin-off have one or more
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