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funeral directing seems to be barred by 805 Ill. Comp. Stat.
10/15 (West 1993).
Arguably under these Illinois corporate requirements, we
think that initially only Mr. Pulliam (and later Mr. Deckard)
could have held Chapel's stock. Homes could not have done so.
Consequently, Homes' distribution of Chapel's stock to Mr.
Pulliam had a definite business purpose.
Section 1.355-2(b)(3), Income Tax Regs., states that a
distribution is not carried out for a valid corporate business
purpose if the business purpose can be achieved through a
nontaxable transaction that does not involve the distribution of
stock of a controlled corporation and which is neither
impractical nor unduly expensive. In the circumstances of this
case we think the corporate business purpose of bringing Mr.
Deckard back as a key employee of the Oblong facility and
providing him with a minority interest in Chapel could not have
been achieved without an installment sale because of Mr.
Deckard's financial condition and the Illinois Professional
Corporation Act requirement that licensed individuals be the
stockholders of Chapel. Homes could not have owned the Chapel
stock during the installment sale. Consequently, we reject
respondent's arguments that the business objectives of Homes
could have been achieved in a nontaxable transaction without a
distribution of Chapel stock to Mr. Pulliam.
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