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or characterized as arising from a passive investment in the
Read-Rite shares unrelated to the sale of the assets.5
Petitioner contends that Conner Malaysia’s receipt and sale
of the restricted Read-Rite shares were part and parcel of, and
integrally related to, its sale of the assets. Therefore,
petitioner argues that under the relation-back doctrine, the
gain on the sale of the shares was inexorably tied to the gain
on the sale of the assets and does not constitute foreign
personal holding company income. Respondent contends that the
facts in this case do not support the application of the
relation-back doctrine and the gain on the sale of the stock
cannot be characterized by reference to the earlier asset sale.
Generally, the relation-back doctrine, established by the
Supreme Court in Arrowsmith v. Commissioner, 344 U.S. 6 (1952),
stands for the principle that a subsequent event which is so
integrally related to a prior event that the two events are in
effect part and parcel of the same transaction, should be
treated as having the same character as the prior event. The
doctrine is premised on the idea that the tax consequences
5 Petitioner admits that any net gain resulting from an
increase in stock price after the lapsing of the sales
restriction should constitute FPHCI.
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