- 11 -
computed in accordance with sections 311(b)(1) and 312. Secs.
355(c), 361(c). Section 311(b)(1) provides that, if a
corporation distributes property to a shareholder in a
transaction governed by sections 301 through 307 and the fair
market value of such property exceeds its adjusted basis in the
hands of the distributing corporation, then gain shall be
recognized to the distributing corporation as if such property
were sold to the distributee at its fair market value. Section
312(b) provides that, on a distribution of appreciated property
by a corporation with respect to its stock, earnings and profits
of the corporation are increased by the excess of the fair market
value of the property over its basis.
II. The Parties’ Arguments
The primary issue in this case is whether petitioner’s
spinoff of Clinpath qualified as a valid reorganization under
section 368(a)(1)(D). Respondent claims it did not so qualify
because the distribution of Clinpath’s stock to petitioner’s
shareholders did not qualify as a nontaxable distribution under
section 355. Respondent asserts that the spinoff of Clinpath and
the subsequent sale of Clinpath stock to NHL were, in reality, a
prearranged sale by petitioner of its clinical business which
failed to qualify as a reorganization under section 368 and a
nontaxable distribution of stock to petitioner’s shareholders
under section 355. Consequently, respondent contends petitioner
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011