- 11 - the stock." Prior to the Tax Reform Act of 1986, section 337 provided that "If, within the 12-month period beginning on the date on which a corporation adopts a plan of complete liquidation, all of the assets of the corporation are distributed in complete liquidation, less assets retained to meet claims, then no gain or loss shall be recognized to such corporation from the sale or exchange by it of property within such 12-month period." Sec. 337(a). This nonrecognition provision was repealed by the Tax Reform Act of 1986, Pub. L. 99-514, sec. 631(a), 100 Stat. 2085, 2269. However, a transitional rule permitted certain small corporations to be eligible for section 337 nonrecognition if they distributed their assets in complete liquidation before January 1, 1989. Both FSRC and DHF satisfied the eligibility requirements for this transitional provision. See Id., sec. 633(d)(1), 100 Stat. at 2278. The terms "liquidation" or "complete liquidation" are not defined in section 331 or in the regulations thereunder. However, related section 1.332-2(c), Income Tax Regs., offers the following standard: A status of liquidation exists when the corporation ceases to be a going concern and its activities are merely for the purpose of winding up its affairs, paying its debts, and distributing any remaining balance to its shareholders. * * * See also Wood v. Commissioner, 27 B.T.A. 162, 166-167 (1932) (applying a similar definition). Whether a corporation hasPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011