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Colonial terminated its business of hauling packaged freight
in 1988.11 It then began selling its operating assets. From
1988 forward, Colonial had no customers. By the end of 1990,
Colonial had essentially disposed of its trucking operation
assets for cash and cash equivalents. The only trucking assets
Colonial retained were its ICC and North Carolina operating
authorities. The ICC operating authority had become worthless,
and Colonial sold its North Carolina operating authority in 1992
for $5,000. For 3 years prior to the merger, Colonial’s assets
consisted principally of tax-exempt bonds and a municipal bond
fund.12 During the 3-year period prior to the merger, Colonial
held 18 tax-exempt bonds, 16 of which were purchased in 1990 and
1991, and 2 of which were purchased in 1992. One bond was
redeemed in 1991, and three bonds were redeemed in 1992 and 1993.
Colonial continued to hold the remaining 14 bonds as of the end
of 1993.
Colonial stopped hauling freight approximately 5 years prior
to the merger, had essentially sold all of its operating assets 3
years prior to the merger, and for 3 years prior to the merger
kept most of its assets in tax-exempt bonds and a municipal bond
11Colonial principally transported furniture manufactured in
North Carolina.
12The passive income from these money management activities
caused Colonial to lose its S corporation status at the end of
its 1992 tax year pursuant to sec. 1362(d)(3). For the taxable
year 1993, Colonial was a C corporation and Central was an S
corporation.
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