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qualify for section 355 nonrecognition treatment on two separate
and independent grounds:
(1) The contemporaneous redemption and distribution fail to
satisfy the requirements of section 355(b) as to active trade or
business.5 Specifically, respondent argues that, although
5 SEC. 355(b) provides:
(b) Requirements as to Active Business.--
(1) In general.--Subsection (a) shall apply only if
either-
(A) the distributing corporation, and the
controlled corporation (or, if stock of more than
one controlled corporation is distributed, each of
such corporations), is engaged immediately after
the distribution in the active conduct of a trade
or business, or
(B) immediately before the distribution, the
distributing corporation had no assets other than
stock or securities in the controlled corporations
and each of the controlled corporations is engaged
immediately after the distribution in the active
conduct of a trade or business.
(2) Definition.--For purposes of paragraph(1), a
corporation shall be treated as engaged in the active
conduct of a trade or business if and only if--
(A) it is engaged in the active conduct of a
trade or business, or substantially all of its
assets consist of stock and securities of a
corporation controlled by it (immediately after
the distribution) which is so engaged,
(B) such trade or business has been actively
conducted throughout the 5-year period ending on
the date of the distribution,
(C) such trade or business was not acquired
(continued...)
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