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selling its assets in exchange for stock that could be worthless
by the time Conner Malaysia was free to dispose of it does not
change the fact that any such decrease in the value of the
shares was unrelated to the asset sale. Furthermore, the
restrictions addressed the ability of Conner Malaysia to trade
the Read-Rite shares and did not specifically prohibit Conner
Malaysia from pledging the shares as collateral or borrowing
against the shares during the lockup period. Thus, despite the
restrictions, it was possible for Conner Malaysia to realize
value from the Read-Rite shares during the restricted period,
and any such value would be separate and independent from the
asset sale.
In short, Conner Malaysia’s receipt of the Read-Rite shares
in exchange for its assets represents a transaction that is not
part and parcel of Conner Malaysia’s subsequent sale of such
shares. The facts simply do not demonstrate the requisite link
between the receipt of the Read-Rite shares and the subsequent
sale of those shares necessary to apply the relation-back
doctrine.10
10 Respondent stresses that the relation-back doctrine has
never been applied in the subpart F setting. We note that our
conclusion that the relation-back doctrine is not applicable in
the instant case does not necessarily bar the use of the
relation-back doctrine in other situations within the subpart F
arena.
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