- 41 -
proceeds of the sale to which the shareholders become entitled will be
decreased by the amount of the corporate level tax imposed. In the
present case, the change in the identity of the sellers, namely the
removal of Martin and MIC, resulted in a significant economic change
that was independent of any change in tax consequences. Once SIC,
wholly owned by Arnold, was designated as the seller, along with
Arnold, a situation was created in which all proceeds of the sale
would come under the control of Arnold, to the exclusion of Martin and
MIC.22
The change in the identity of the sellers was not a "last minute"
change in a deal that had already been consummated, or whose terms had
been completely negotiated. Rather, it signaled the birth of a new
deal significantly different from its predecessor, both in terms of
what would be sold and who would receive the proceeds. Stated
differently, having Arnold and SIC, rather than petitioner, sell
assets to H�agen-Dazs was not a mechanism to give effect to a
transaction that had already been negotiated by, or on behalf of,
petitioner. See Kaufmann v. Commissioner, 11 T.C. at 490-491 (Kern,
22 Compare the ownership position of the single shareholder,
which remained unchanged, in Idol v. Commissioner, 38 T.C. 444
(1962), affd. 319 F.2d 647 (8th Cir. 1963), with Standard Linen
Serv., Inc. v. Commissioner, 33 T.C. 1 (1959), and Esmark, Inc. &
Affiliated Cos. v. Commissioner, 90 T.C. 171 (1988), affd.
without published opinion 886 F.2d 1318 (7th Cir. 1989), where
redemptions accomplished a substantial change in the ownership of
the stock of the taxpayer corporation. Similar to Standard Linen
and Esmark, MIC's redemption of Arnold's stock substantially
changed the proportionate ownership of MIC by eliminating one of
the two shareholders and assured that Arnold would receive the
entire consideration paid by H�agen-Dazs for acquisition of the
distribution rights.
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