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Sunbelt had been engaged in an active trade or business for more
than 5 years on the date of the distribution, control of Sunbelt
was acquired by the distributing corporation (Ridge), within such
5-year period, in a transaction (the redemption) in which gain
was recognized, thereby violating the requirements of section
355(b)(2)(D)(ii).
(2) Petitioners have failed to prove that the distribution
was designed to achieve a corporate business purpose, as required
by section 1.355-2(b), Income Tax Regs.
5(...continued)
within the period described in subparagraph (B) in
a transaction in which gain or loss was recognized
in whole or in part, and
(D) control of a corporation which (at the time
of acquisition of control) was conducting such
trade or business--
(i) was not acquired by any distributee
corporation directly (or through 1 or more
corporations, whether through the distributing
corporation or otherwise) within the period
described in subparagraph (B) and was not
acquired by the distributing corporation
directly (or through 1 or more corporations)
within such period, or
(ii) was so acquired by any such corporation
within such period, but, in each case in which
such control was so acquired, it was so
acquired, only by reason of transactions in
which gain or loss was not recognized in whole
or in part, or only by reason of such
transactions combined with acquisitions before
the beginning of such period.
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Last modified: May 25, 2011