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assert, pursuant to section 351(a), no gain is recognized by Mr.
Parmentier on the exchange of his interest in Andantech for the
preferred stock of RD Leasing.17 Moreover, petitioners assert,
pursuant to section 358(a), Mr. Parmentier’s basis in his RD
Leasing preferred stock is the same as that in his 98-percent
interest in Andantech that was transferred to RD Leasing. And
pursuant to section 362(a)(1), RD Leasing’s basis in the 98-percent
Andantech interest received from Mr. Parmentier is equal to Mr.
Parmentier’s basis in the partnership interest immediately before
the partnership-interest preferred-stock exchange (approximately
$119 million18).
17 Sec. 351(a) provides:
SEC. 351(a). General Rule.–-No gain or loss shall
be recognized if property is transferred to a
corporation by one or more persons solely in exchange
for stock in such corporation and immediately after the
exchange such person or persons are in control (as
defined in section 368(c)) of the corporation.
Sec. 368(c) defines control as:
SEC. 368(c). Control Defined.–-* * * ownership of
stock possessing at least 80 percent of the total
combined voting power of all classes of stock entitled
to vote and at least 80 percent of the total number of
shares of all other classes of stock of the
corporation.
18 Mr. Parmentier’s basis in his partnership interest, if
computed according to petitioners’ contentions under secs. 705(a)
and 752, would be as follows:
Initial contribution $196,000
Plus
Share of UBS loan ($14,995,931 x 98%) 14,696,012
(continued...)
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