- 17 -
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
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011