- 12 - 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.Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Next
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