Textron Inc. and Subsidiary Companies - Page 14

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          4.   Whether the AVCO Stock Was “Property”                                  
               Deferral under section 1.1502-14(d)(4), Income Tax Regs., is           
          required only if the obligation is received by a member in                  
          exchange for property.  See sec. 1.1502-14(d)(4)(i)(a), Income              
          Tax Regs.  The term “property” is undefined in the regulations.             
               The parties agree that Paul Revere received the AVCO note in           
          a redemption satisfying the requirements of section 302.                    
          Petitioner argues that because stock of the distributing                    
          corporation is not considered property in a section 302                     
          transaction, the reference in section 1.1502-14(d)(4), Income Tax           
          Regs., to “property” excludes the AVCO stock given up by Paul               
          Revere in the stock redemption.10  Petitioner further argues that           
          this reading is consistent with the economic substance of the               
          transaction because this would permit petitioner to recognize and           
          take into account the substantial economic loss that Paul Revere            
          realized in the redemptions.                                                
               The pre-1966 consolidated return regulations deferred to               
          Code definitions when a word used in the regulations was not                
          specifically otherwise defined.11  See Foster v. Commissioner,              

               10Sec. 317(a) provides:  “For purposes of this part * * *              
          [secs. 301 through 318], ‘property’ means money, securities, and            
          any other property; except that such term does not include stock            
          in the corporation making the distribution (or rights to acquire            
          such stock).”                                                               
               11T.D. 6894, 1966-2 C.B. 362, promulgated new consolidated             
          return regulations under sec. 1502 of the 1954 Code.  The new               

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