- 20 -
distinguish between them would deny economic reality"
and would allow the common parent of a consolidated
group to circumvent easily the recapture requirement.
* * *
The position we adopted in our opinion in Walt Disney, Inc.
v. Commissioner, 97 T.C. at 221, failed to apply properly the
substance-over-form doctrine and failed to give proper weight to
section 1.47-3(f)(1), Income Tax Regs., which provides clearly
that to the extent ownership of an affiliated transferee
corporation changes hands as part of the transfer of property to
the transferee corporation, a taxable disposition has occurred
under section 47. See sec. 1.47-3(f)(1), (2), (6) Examples (2),
(3), and (4), Income Tax Regs.
The above regulations under section 1.47-3(f)(1), (2) (6),
should be read together with section 1.1502-3(f)(3), Income Tax
Regs. Where a change in ownership of an affiliated transferee
company is contemplated at the time of a transfer of section 38
property and where the change in ownership that occurs is, in
substance, in economic reality, and/or under the step transaction
doctrine, integral to the transfer of the property outside the
affiliated group, the transfer should be treated, to the extent
of the change in ownership of the transferee corporation, as a
taxable disposition under section 47.
The weight to be given a revenue ruling is not the issue in
this case. Rather, the issue is the validity of the underlying
rationale of Rev. Rul. 82-20, 1982-1 C.B. 6, -- namely, whether
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