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(the value of the distributed Sunbelt stock) thereby reducing the
interval before additional distributions by Ridge would become
taxable to petitioners. Moreover, petitioners’ argument proves
too much, as it would also apply to Ridge’s purchase of Hutto’s
Sunbelt stock directly from Hutto during the 5-year period.
Petitioners’ additional argument (section 355(b)(2)(D) does
not deal with corporate level gain) ignores the post-1986
evolution of section 355 (including amendments to section
355(b)(2)(D)) into a weapon against avoidance of the repeal of
the General Utilities9 doctrine, which, prior to its repeal by
the Tax Reform Act of 1986, Pub. L. 99-514, sec. 631(c), 100
Stat. 2085, 2272, generally provided for the nonrecognition of
gain realized by a corporation on the distribution of appreciated
property to its shareholders. As noted by one commentator:
It should not be surprising that more attention
has been directed toward Section 355 today than was
ever the case in the past. From a tax perspective, its
attraction is grounded on the fact that it is one of
the few (some might say the only) viable opportunity to
escape the repeal of the General Utilities doctrine.
* * *
Gould, "Spinoffs: Divesting in a Post-General Utilities World,
with Emphasis on Practical Problems", 69 TAXES 889 (Dec. 1991);
(fn. refs. omitted). Indeed, petitioners themselves place
obvious reliance upon section 355 to avoid taxation pursuant to
section 311(b).
9 See General Utils. & Operating Co. v. Helvering,
296 U.S. 200 (1935).
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