Seagate Technology, Inc. - Page 2




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                    The parties seek to determine, as a matter of law,                
               whether the relation-back doctrine, established in                     
               Arrowsmith v. Commissioner, 344 U.S. 6 (1952), applies                 
               for purposes of sec. 954, I.R.C., in characterizing S’                 
               portion of the gain relating to the increase in the                    
               value of the C stock during the period in which S was                  
               prohibited from selling the stock.  P contends that,                   
               under the relation-back doctrine, the sale of the C                    
               stock was integrally related to the sale of the                        
               operating assets due to the lockup agreement and the                   
               restrictions on re-sale of the C stock, and that the                   
               gain on the sale of the stock must take its character                  
               from the sale of the assets and does not constitute                    
               FPHCI.  R contends that the relation-back doctrine does                
               not apply and S’ gain on the sale of C stock                           
               constitutes gain from a separate investment in stock                   
               giving rise to FPHCI taxable to P.                                     
                    Held: The relation-back doctrine established in                   
               Arrowsmith does not apply based on the facts of this                   
               case to characterize S’ gain on the sale of C stock for                
               purposes of sec. 954, I.R.C., and accordingly the gain                 
               on the sale of the C stock constitutes FPHCI.                          


               Mark A. Oates, Thomas V.M. Linguanti, John M. Peterson, Jr.,           
          Mary E. Wynne, and Andrew P. Crousore, for petitioner.                      
               Debra K. Estrem, Michael J. Cooper, Bryce A. Kranzthor,                
          Jeffrey L. Heinkel, Lavonne D. Lawson, Ewan D. Purkiss, and Mark            
          S. Heroux, for respondent.                                                  

                                MEMORANDUM OPINION                                   
               GERBER, Judge:  Pursuant to Rule 121,1 this matter is before           
          the Court on the parties’ cross-motions for partial summary                 


               1 Unless otherwise indicated, all Rule references are to the           
          Tax Court Rules of Practice and Procedure, and all section                  
          references are to the Internal Revenue Code in effect for the               
          taxable years at issue.                                                     




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