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chains and food service accounts, and business records
relating thereto, in exchange for all the stock of SIC,
and immediately distributed the SIC stock to A in
exchange for all of A's stock in MIC. Following
further negotiations, A and SIC, 3 weeks thereafter,
entered into a contract to sell HD all their intangible
assets relating to distribution of HD ice cream
products. Two weeks thereafter, following the
determination of a purchase price adjustment provided
for in the final version of the contract, the sale
closed and SIC received the proceeds of sale, which it
distributed to A.
1. Held: The benefits of the personal relation-
ships developed by A with the supermarket chains and
A's oral agreement with the founder of HD were not
assets of MIC that were transferred by MIC to SIC and
thereafter sold by SIC to HD; A was the owner and
seller of those assets.
2. Held, further, respondent's attempt to apply
Commissioner v. Court Holding Co., 324 U.S. 331 (1945),
to regard MIC as the seller of assets to HD is rejected
because the final sale to HD was on terms that were
negotiated with HD by A and SIC that were significantly
different from the terms of the earlier proposed
transaction under negotiation between MIC and HD.
3. Held, further, MIC's distribution of SIC stock
to A was not entitled to nonrecognition of gain under
sec. 355, I.R.C., because SIC was not engaged in the
active conduct of a trade or business after the
distribution of SIC stock to A.
4. Held, further, although MIC's transfer of
intangible assets to SIC in exchange for SIC stock was
entitled to nonrecognition of gain under sec. 351,
I.R.C., the immediate distribution of SIC stock in
redemption of A's stock in MIC was a distribution of
appreciated property under secs. 311(b) and 317(b),
I.R.C., on which recognized gain in the amount of
$141,000 is taxable to MIC under sec. 1374, I.R.C.
5. Held, further, MIC is not liable for a
negligence addition to tax under sec. 6653(a), I.R.C.,
but is liable for a substantial understatement addition
under sec. 6661, I.R.C.
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