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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 owned
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