- 64 -
Accordingly, respondent contends that the tax benefits of the
transaction exponentially dwarfed both the potential and actual
business advantages of the acquisition and dropdown. Petitioner
contends that respondent's argument is based in substance on old
section 269(c), which was repealed by Congress during 1976. See
Tax Reform Act of 1976, Pub. L. 94-455, sec. 1901(a)(38), 90
Stat. 1771.33
The magnitude of the NOL's in issue supports an inference
that the acquisition and dropdown were undertaken, at least in
part, for the purpose of securing a tax benefit. We are not
persuaded, however, that the size of the NOL's alone calls for a
finding that petitioner's primary purpose for the transactions in
33 Prior to its repeal, old sec. 269(c) read as follows:
SEC. 269(c). Presumption in Case of Disproportionate
Purchase Price.--The fact that the consideration paid upon
an acquisition by any person or corporation described in
subsection (a) is substantially disproportionate to the
aggregate--
(1) of the adjusted basis of the property of the
corporation (to the extent attributable to the interest
acquired specified in paragraph (1) of subsection (a)),
or the property acquired specified in paragraph (2) of
subsection (a), and
(2) of the tax benefits (to the extent not
reflected in the adjusted basis of the property) not
available to such person or corporation otherwise than
as a result of such acquisition, shall be prima facie
evidence of the principal purpose of evasion or
avoidance of Federal income tax. This subsection shall
apply only with respect to acquisitions after March 1,
1954.
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