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Background3
Textron Inc. (Textron) is the common parent of an affiliated
group of corporations within the meaning of section 1504(a) (the
Textron group) that filed a consolidated Federal income tax
return for its 1987 taxable year. For certain periods of time,
members of the Textron group included Paul Revere Corporation
(Paul Revere) and AVCO Corporation (AVCO).
Before joining the Textron group in 1985, AVCO was the
common parent of its own affiliated group of corporations within
the meaning of section 1504(a) (the AVCO group). In February
1967, Paul Revere purchased four million shares of AVCO stock for
$135 million. AVCO’s remaining stock was owned by the general
public and traded on the New York Stock Exchange. In November
1967, AVCO acquired all of the stock of Paul Revere, and Paul
Revere became a member of the AVCO group. Paul Revere still
owned the four million shares of AVCO stock at the time it was
acquired by AVCO.
On December 1, 1977, AVCO redeemed all of Paul Revere’s AVCO
stock (the stock redemption). In return for this stock, Paul
Revere received a promissory note from AVCO (the AVCO note), with
a face amount and fair market value of $40,419,005, and other
property. Paul Revere realized a $55,353,750 loss on the stock
3 When the petition was filed in this case, petitioner’s
principal place of business was Providence, Rhode Island.
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Last modified: May 25, 2011