- 13 - appropriate in this case and that the tax liability for the capital gain should be calculated on the basis of CCC’s established history of securities turnover. We agree with respondent. However, before we delve into the parties’ arguments and their experts’ opinions, it is helpful to review the legal history of the effect of built-in capital gain tax liability in the valuation of corporations. Before 1986, this Court recognized that gain on appreciated corporate assets could be avoided at the corporate level under the principles of the General Utilities doctrine.7 That doctrine was based on the holding in Gen. Utils. & Operating Co. v. Helvering, 296 U.S. 200 (1935), that there would be no recognition by the distributing corporation of inherent gain on appreciated corporate property that was distributed to shareholders. Accordingly, a corporation could distribute its appreciated property to shareholders or liquidate without paying capital gain tax at the corporate level. On the basis of that understanding and before 1986, this Court consistently rejected taxpayers’ attempts to discount the value of a corporation on the basis of any inherent capital gain tax liability on appreciated corporate property. See, e.g., Estate of Piper v. Commissioner, 72 T.C. 1062, 1087 (1979); 7 The General Utilities doctrine, as codified in former secs. 336 and 337, was repealed by the Tax Reform Act of 1986, Publ. L. 99-514, sec. 631(a), 100 Stat. 2269.Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Next
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