- 21 -
In Kinsey v. Commissioner, 477 F.2d 1058 (2d Cir. 1973),
affg. 58 T.C. 259 (1972), the taxpayer donated to his alma mater
a controlling interest in a corporation that previously had
adopted a plan of liquidation pursuant to recommendation by its
board of directors and approval by its shareholders. The Court
of Appeals for the Second Circuit recognized that the
Commissioner's case in Hudspeth v. United States, supra, was
stronger because the donor in that case retained a majority of
the corporation's stock, but, nevertheless, applied the basic
principle in Hudspeth v. United States, supra, that the reality
and substance of events determine the incidence of taxation and
not formalities and remote hypothetical possibilities. Kinsey v.
Commissioner, supra at 1063; see also Jones v. United States, 531
F.2d 1343, 1346 (6th Cir. 1976) (rejecting taxpayer's attempt to
distinguish Hudspeth v. United States, supra, the court stated,
“we view a taxpayer's control over the corporation as only one
factor in determining whether a liquidation is practically
certain to occur” (fn. ref. omitted)). The court focused on the
fact that although the donee received a majority of the
corporation's shares, the donee could not have unilaterally
stopped the liquidation because it did not have the requisite
two-thirds control. Kinsey v. Commissioner, supra at 1063. The
court concluded that, considering all of the circumstances, the
transfer of stock to the donee was an anticipatory assignment of
liquidation proceeds. Id.
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011