- 10 - Regarding the control element, section 304(c)(1) specifies that “control means the ownership of stock possessing at least 50 percent of the total combined voting power of all classes of stock entitled to vote, or at least 50 percent of the total value of shares of all classes of stock.” Section 304(c)(3)(A) further clarifies that “Section 318(a) (relating to constructive ownership of stock) shall apply for purposes of determining control under this section”. As a result, indirect ownership through family members and related entities is taken into account in ascertaining control. See sec. 318(a). A person who owns at least 5 percent of a corporation’s stock, for example, is considered as owning a proportionate amount of any shares held by that corporation. See sec. 304(c)(3)(B)(i); sec. 318(a)(2)(C). Property is defined for purposes of sections 301 through 318 as “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).” Sec. 317(a); cf. Bhada v. Commissioner, 89 T.C. 959, 963-964 (1987), affd. 892 F.2d 39 (6th Cir. 1989), affd. sub nom. Caamano v. Commissioner, 879 F.2d 156 (5th Cir. 1989). Given the foregoing requirements and definitions, we are satisfied that Mr. Combrink’s exchange of LINKS stock for debt release is a transaction of the type described in section 304(a)(1). With respect to control, Mr. Combrink directly ownedPage: 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