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b. Literal Compliance With Section 355 Not Always
Required
Petitioners also argue that nonrecognition treatment is
justified herein on the basis of case law and respondent’s
pronouncements in which nonrecognition of gain was afforded to a
transaction despite a failure to satisfy the literal terms of the
governing statute. In general, the authorities cited by
petitioners involve either (1) cash payments that are disregarded
in determining the applicability of a nonrecognition provision,
see Rev. Rul. 55-440, 1955-2 C.B. 226, Chief Counsel’s
Memorandum, formerly General Counsel’s memorandum (G.C.M.), 33712
(Dec. 21, 1967), and G.C.M. 32868 (June 26, 1964) or (2) gain
recognition transfers of assets or stock between affiliated
corporations within the 5-year period that are held not to negate
the tax-free treatment of a subsequent spinoff pursuant to
section 355(b)(2)(C) or (D); see Commissioner v. Gordon, 382 F.2d
499 (2d Cir. 1967), revd. on other grounds 391 U.S. 83 (1968);
Rev. Rul. 78-442, 1978-2 C.B. 143; Rev. Rul. 69-461, 1969-2 C.B.
52; G.C.M. 35633 (Jan. 23, 1974).
Both Rev. Rul. 55-440, supra, and G.C.M. 33712, supra,
determine that the “solely for voting stock” requirement of a
tax-free reorganization under section 368(a)(1)(B) is satisfied
where, in connection with the reorganization, the acquired
corporation purchases (redeems) some of its stock for cash.
G.C.M. 32868, supra, determines that the cash redemption of
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