Clark D. and Janis L. Pulliam - Page 17

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          corporate business purposes for Homes to create Chapel because it           
          wanted to protect itself from any possible competition by Mr.               
          Deckard in the funeral business in the Oblong area, and it wanted           
          to reemploy Mr. Deckard as a key employee to operate and manage             
          the Oblong facility.  They also argue that Homes had to                     
          distribute Chapel's stock to Mr. Pulliam because it was believed            
          that Illinois law required funeral homes to be professional                 
          service corporations having shareholders who are licensed by the            
          State of Illinois as funeral directors and embalmers.  Thus,                
          petitioners maintain that both of these corporate business                  
          purposes are strong evidence of nondevice which overcomes the               
          evidence that there was principally a device for the distribution           
          of the earnings and profits of Homes or Chapel or both.                     
          Respondent's Contentions                                                    
               To the contrary, it is respondent's position that this                 
          transaction fails to qualify as a tax-free distribution of stock            
          under section 355 and the applicable regulations.  Respondent               
          argues that there was no corporate business purpose for the                 
          distribution by Homes of Chapel stock to Mr. Pulliam, and that              
          there was no compelling reason to distribute Chapel's stock to              
          Mr. Pulliam other than to distribute substantial earnings and               
          profits of Homes to Mr. Pulliam without being subject to the                
          dividend provisions of section 301.  It is further argued that,             
          when Homes distributed the Chapel stock, Illinois law relating to           
          funeral homes did not require that Chapel be a professional                 




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