Gary D. and Lindy H. Combrink - Page 9




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                    SEC. 304(a).  Treatment of Certain Stock                          
               Purchases.--                                                           
                         (1) Acquisition by related corporation (other                
                    than subsidiary).--For purposes of sections 302                   
                    and 303, if--                                                     
                              (A) one or more persons are in control                  
                         of each of two corporations, and                             
                              (B) in return for property, one of the                  
                         corporations acquires stock in the other                     
                         corporation from the person (or persons) so                  
                         in control,                                                  
                    then (unless paragraph (2) applies) such property                 
                    shall be treated as a distribution in redemption                  
                    of the stock of the corporation acquiring such                    
                    stock.  To the extent that such distribution is                   
                    treated as a distribution to which section 301                    
                    applies, the stock so acquired shall be treated as                
                    having been transferred by the person from whom                   
                    acquired, and as having been received by the                      
                    corporation acquiring it, as a contribution to the                
                    capital of such corporation.                                      
               Accordingly, there are two elements required for a                     
          transaction to fall within the purview of section 304(a)(1).                
          First, the transferor(s) of the issuing corporation’s stock must            
          be in control of both the issuing and the acquiring corporations.           
          Second, the issuing corporation’s stock must be transferred to              
          the acquiring corporation in exchange for property.  Transfers so           
          described in section 304(a)(1) are often referred to as “brother-           
          sister” stock sales; section 304(a)(2) offers analogous rules for           
          “parent-subsidiary” sales.                                                  
               To guide in evaluating the above two requisites, section 304           
          and related sections set forth several pertinent definitions.               






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Last modified: May 25, 2011