- 27 - sheet insolvency was so great that there may well have been no reasonable expectation that a continuation of the business would provide the parent with a return of its investment. Cf. Morton v. Commissioner, supra at 1279. Yet once the intercompany debt was forgiven, the balance sheet for FY 1984 showed a deficit in shareholder's equity of only $26,228, and the same considerations that would have supported a reasonable expectation of recovering part of the intercompany debt preclude a determination that the stock was worthless. As internal corporate documents of WFGI reflect, the primary purpose of canceling the intercompany debt was “to get the capital structure back into compliance with French law” and avert the threat of involuntary insolvency proceedings. WFGI's officers would not have forgiven the subsidiary's debt if they did not believe that this would provide meaningful support to itsPage: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Next
Last modified: May 25, 2011