Mark J. Steel and Connie J. Steel - Page 19




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          lawsuit to Norway, and then Norway transferred the lawsuit to               
          petitioners for their BFI stock.  This might result in tax                  
          consequences to both BFI, see sec. 311(b), and Norway either at             
          the time of the distribution or at the time of the settlement.              
               In Henry Schwartz Corp. v. Commissioner, 60 T.C. 728, 738-             
          739 (1973), we recognized the interplay of the tax effects of               
          particular transactions and their intended structure, stating:              
                    In this regard it is important to note that the                   
               parties to the agreement, Henry and Sydell and Suval,                  
               were dealing at arm’s length and indeed had conflicting                
               interests with respect to the treatment of the policy.                 
               Thus, if the distribution of the policy was considered                 
               as part of the overall price for the stock, and the                    
               distribution was from Plastic Calendering to Suval and                 
               then to Henry, then Suval might be charged with a                      
               dividend on the initial distribution of the policy to                  
               it.  See Frithiof T. Christensen, 33 T.C. 500, 504-505.                
               On the other hand, if the policy were distributed to                   
               Henry by Plastic Calendering, not as part of the                       
               purchase price for the stock but simply because the                    
               purchaser did not want this asset and the sellers had                  
               agreed that it would not be part of the sale, then                     
               Henry might be charged with receipt of a dividend.  See                
               John R. West, 37 T.C. 684, 687.  Thus, the agreement                   
               between the parties represents an accurate reflection                  
               of an arm’s-length transaction, and this agreement                     
               makes it clear that the policy was distributed from                    
               Plastic Calendering to Suval and then to Henry.                        
          Surely, if petitioners’ characterization of the transactions in             
          this case were correct, a reduced purchase price would have been            
          negotiated reflecting BFI’s or Norway’s tax liability for those             
          amounts.  Instead, the purchase price continued to reflect the              
          book value of the assets and liabilities of BFI.  It appears from           
          the record that the parties to the stock sale were relatively               






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