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SIC used petitioner's employees in all of its operational
activities. Petitioner was retained as an independent contractor by
SIC. Petitioner and Martin’s agreement with SIC and Arnold stated
that MIC would provide all services “reasonably necessary” for SIC to
carry on during an interim period while it made alternative
arrangements. Pursuant to that agreement, drivers employed by MIC
made all the deliveries to SIC's supermarket accounts during the
interim 6-week period. Other than perhaps Arnold, its sole
shareholder, SIC had no employees.
SIC used petitioner's tangible assets in all of its operational
activities. After the distribution, petitioner continued to own all
the refrigerated trucks and storage facilities required to operate
both the small store and supermarket businesses. During the period
between the split-off and the sale to H�agen-Dazs, trucks owned by MIC
made all the deliveries to the supermarkets, and the MIC warehouse and
refrigeration facilities were used to store the H�agen-Dazs ice cream
products until they could be delivered to the supermarkets. The
supermarket customers themselves were largely unaware until the
closing of the transactions with H�agen-Dazs on July 22 that Martin
and MIC had parted company from Arnold and SIC.
4. Petitioner’s Gain Recognized on Distribution of SIC Stock
Because petitioner’s transfer of assets to SIC and distribution
of SIC stock to Arnold do not qualify for nonrecognition of gain under
section 355, we must determine the Federal income tax consequences of
these transactions under other provisions of the Code.
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