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The evidence indicates that CC Acquisition was formed as a
subsidiary of CC Holdings solely to facilitate CC Holdings'
acquisition of the stock in petitioner. CC Acquisition was
incorporated only 10 days prior to the LBO, and CC Acquisition
did not conduct any activities unrelated to the LBO during the
short period of its existence.
The several integrated steps of the LBO involving
CC Acquisition -- its formation, its receipt of financing, its
merger into petitioner, and petitioner's assumption of its
liabilities -- constituted prearranged integrated steps to
facilitate the acquisition of the stock of petitioner, and these
steps were mutually interdependent.
We note that other than the formation of CC Acquisition,
which occurred 10 days prior to the LBO, the remaining steps to
the transaction essentially occurred simultaneously on August 25,
1989.
Because CC Acquisition was formed merely as a transitory
corporation to facilitate the LBO, we conclude that
CC Acquisition and the steps of the transaction involving
CC Acquisition should be disregarded for Federal income tax
purposes. In effect, the transaction is to be treated for
Federal income tax purposes as if petitioner received loans
directly from FNBB and then used $16.75 million of the loan
proceeds to redeem the shares of stock that were held by Cruze.
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