- 18 -
reduce his aggregate stock basis, since the basis of the shares
he transferred is added to the basis of the shares he retained,
in accordance with the treatment of his transfer of the shares as
a contribution to the capital of SPS.6
We are satisfied that the business reincorporation
transaction did not qualify as a reorganization for income tax
purposes. Since WIS did not transfer substantially all of its
assets to SPS and distribute all of its remaining properties, the
transaction does not satisfy the requirements of a C
reorganization or an acquisitive D or G reorganization. Secs.
368(a)(1)(C), (D), (G), (2)(G), 354(b). Since WIS ceased active
business following the formation of SPS, the requirements of a
divisive D or G reorganization are not satisfied. Secs. 368(a)
(1)(D), (G), 355(b)(1). As a result, petitioner did not receive
the stock of SPS in an exchange to which either section 354 or
6 If a shareholder of a corporation transfers stock to a
corporate employee in consideration of the performance of
services for the corporation, the shareholder is treated as
having contributed the stock to the capital of the corporation
and the corporation is treated as having transferred the stock to
the employee immediately thereafter. Tilford v. Commissioner,
705 F.2d 828 (6th Cir. 1983), revg. 75 T.C. 134 (1980); Estate of
Foster v. Commissioner, 9 T.C. 930, 936 (1947); Webb v. United
States, 560 F. Supp. 150, 155, 157 (S.D. Miss. 1982); sec. 1.83-
6(d)(1), Income Tax Regs.; see Commissioner v. Fink, 483 U.S. 89,
98 n.14 (1987); Frantz v. Commissioner, 83 T.C. 162, 174-181
(1984), affd. 784 F.2d 119 (2d Cir. 1986). The shareholder’s
basis in the transferred shares is reallocated to the shares he
retains. Estate of Foster v. Commissioner, supra; sec.
1016(a)(1); sec. 1.263(a)-2(f), Income Tax Regs. Cf. Rev. Rul.
80-76, 1980-1 C.B. 15.
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011