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there is a continuing purpose to terminate corporate affairs and
dissolve the corporation; and (3) whether the corporation’s
activities are directed and confined to that purpose. See Estate
of Maguire v. Commissioner, 50 T.C. 130, 140 (1968).
Although the term “complete liquidation” is not defined in
the Code or the regulations to section 331, we have noted in
Olmsted v. Commissioner, T.C. Memo. 1984-381, that the
regulations under section 332 offer a definition of “complete
liquidation” that applies equally to section 331:
A status of liquidation exists when the corporation
ceases to be a going concern and its activities are
merely for the purpose of winding up its affairs,
paying its debts and distributing any remaining balance
to its shareholders. A liquidation may be completed
prior to the actual dissolution of the liquidating
corporation. However, legal dissolution of the
corporation is not required.*** [Sec. 1.332-2(c),
Income Tax Regs.]
Under Illinois law, a corporation is prohibited from making
a distribution if, after giving it effect, the corporation would
be insolvent. See 805 Ill. Comp. Stat. 5/9.10(c)(1) (West 1984).
A corporation is insolvent when it is unable to pay its debts as
they become due in the usual course of its business. See id.
5/1.80(m).
Petitioner relies on Rendina v. Commissioner, T.C. Memo.
1996-392, to support his contention that BERM had de facto
liquidated during December 1994 for tax purposes. However, after
reviewing Rendina, we find that it is distinguishable. In
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