- 23 -
found that the purchasers intended to use the corporation’s
income as a “financing tool” for a portion of the purchase price
of the selling shareholders stock. Id. at 717-718. In this
case, there is no evidence to suggest that Norway required the
assignment of the lawsuit in order to finance the acquisition of
the BFI stock, and the purchase price of the stock was not
reduced to reflect the lawsuit’s assignment. The transactions in
this case were not designed as a “financing tool”.
Petitioners also suggest that where the corporation would
not have made the distribution but for the stock sale, the
transactions should be integrated. Petitioners cite Casner v.
Commissioner, supra at 397; however, even Casner requires a
closer link to the purchase of stock than petitioners’ “but for”
test. Indeed, the Court of Appeals for the Fifth Circuit cited a
variety of factors to support its view that the distribution and
the stock sale transaction should be integrated: (1) The
“dividend” distribution and the stock sale depended on one
another; (2) the purpose of the distribution was to permit the
taxpayers to sell all their stock and for the buying shareholders
to finance their purchase of that stock; (3) the parties intended
that the distributions be treated as part of the purchase price
13(...continued)
v. Danielson, 378 F.2d 771 (3d Cir. 1967), or the strong proof
rule. Id. at 714-715. In the instant case, we conclude that the
strong proof rule applies.
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