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sell the assets for $27,500,000, payable in Read-Rite shares. A
subsequent adjustment based on an appraisal of the inventory and
fixed assets reduced the aggregate consideration to $19,266,237.
This amount represented the fixed, noncontingent purchase price
for which Conner Malaysia agreed to sell its assets. The number
of Read-Rite shares to be delivered to Conner Malaysia as
consideration for the assets was determined by dividing this
amount by the IPO per share price of Read Rite stock.
Nothing in the Asset Purchase Agreement gave any indication
that the sales price for the assets could not be determined
until the restrictions on the Read-Rite stock lapsed. There is
also no indication in the Asset Purchase Agreement that any
subsequent gain on Conner Malaysia’s sale of the Read-Rite
shares merely represented an adjustment or additional portion of
the purchase price of the assets. Thus, the fact that the
consideration for the assets was Read-Rite stock does not, by
itself, provide an integral link between the two transactions.
Petitioner also cites several cases that were decided under
the open transaction doctrine.9 These cases, however, are
9 Under the open transaction doctrine, the original
transaction is held open and the resulting tax consequences are
suspended, while under the relation-back doctrine, the original
transaction is closed, and the subsequent taxable transaction
receives its character based on the original transaction. Unlike
the relation-back doctrine, the touchstone for use of the open
transaction doctrine is the inability to value what was received
in the original transaction.
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