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existence and participation in the sale to H�agen-Dazs should be
ignored for Federal income tax purposes. Respondent's argument
implies that petitioner constructively received the proceeds from
the sale of assets to H�agen-Dazs, and then constructively
distributed those proceeds to Arnold in redemption of his stock
in petitioner.17
In Commissioner v. Court Holding Co., supra, a corporation
with two shareholders, husband and wife, owned an apartment
building as its only asset. Negotiating on behalf of the
corporation, the husband entered into an oral agreement with the
lessee that fixed all the terms and conditions for the sale of
the apartment building and received a payment on account from the
purchaser. After the negotiations had been completed, the
husband was informed of the adverse tax consequences of a sale by
the corporation. He thereupon caused shareholder resolutions to
be adopted under which the corporation declared and distributed
the apartment building to the shareholders as a "liquidating
17 Implicit in respondent's Court Holding argument is the
view that SIC's ownership of the assets transferred to it by MIC,
and Arnold's ownership of SIC stock were too transitory to be
recognized for tax purposes. However, we need not grapple with
the transitory nature of SIC and the tax consequences of such a
designation on the transactions in the case at hand. Respondent
acknowledges that if we decide that Court Holding does not apply
to attribute the sale to petitioner, then the transaction should
be regarded as a sec. 351 transfer from MIC to SIC, followed by a
taxable redemption of Arnold's shares in petitioner, thereby
acknowledging the existence of SIC for Federal income tax
purposes under respondent's alternative argument. See infra pp.
46-49.
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