-6-
From its inception, Spalding filed its returns on the basis
of a fiscal year ending on September 30. When Spalding became
the 100-percent owner of INI, Spalding and INI elected to file
consolidated returns using Spalding's September 30 fiscal year.
In 1988, petitioner and Cates reached an impasse as to the
business direction of Spalding and INI. They agreed to dissolve
their business relationship according to the terms set forth in
the Shareholders' Agreement and Plan of Reorganization (the
Agreement) that they signed on September 29, 1988, and the
Agreement to Amend the Agreement (the Amendment) signed on March
1, 1989. The Agreement was executed to separate Spalding and INI
pursuant to section 355.3
After the Amendment was executed, Spalding disposed of its
interest in a general partnership that was engaged in providing
parking services at an airport and transferred $80,051 to INI as
part of the division of corporate assets. See INI, Inc. v.
Commissioner, T.C. Memo. 1995-112, affd. without published
opinion 107 F.3d 27 (11th Cir. 1997).
At the time of the separation, Spalding had on its books and
records accounts in which it recorded the loans the corporation
3
In INI, Inc. v. Commissioner, T.C. Memo. 1995-112, affd.
without published opinion 107 F.3d 27 (11th Cir. 1997), this
Court found that by proxies executed on Sept. 29, 1988,
petitioner had transferred his right to vote his Spalding stock
to Cates, and Spalding had irrevocably transferred its exclusive
right to vote its INI stock to petitioner. We held, therefore,
that as of Sept. 29, 1988, Spalding and INI were no longer
affiliated as defined in sec. 1504(a) and were not permitted to
file a consolidated return.
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