- 8 -
Combrink’s transfer of the LINKS stock to COST is not covered by
the section 304(b)(3)(B) exception. In respondent’s view, the
evidence fails to establish that the liability released by COST
was incurred to acquire the transferred LINKS stock. Respondent
therefore alleges that the transaction must be taxed as a
dividend in accordance with sections 302(d) and 301.
Thus, as framed by the parties’ contentions, resolution of
this matter requires determining the applicability of section 304
to the December 1996 transfer of LINKS stock. In considering
this broad question, we address in turn, to the extent relevant,
each of three subissues. The first is whether the subject
transaction is, absent any exception, of a type intended to be
covered by section 304(a). If yes, the second question is
whether section 304(b)(3)(B) exempts the transfer from the
redemption characterization that subsection (a) would otherwise
require. Third, it will be necessary to analyze the appropriate
tax treatment in light of the answers given to the foregoing
inquiries.
I. The General Rule--Section 304(a)
As previously indicated, section 304 mandates that certain
transactions involving shares in related corporations be recast
for tax purposes as redemptions. The general rule is set forth
in section 304(a) and provides in relevant part as follows:
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011