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petitioner sold its clinical business to NHL directly or
distributed its clinical business to its shareholders prior to
any sale.
For the reasons set forth above, petitioner has failed to
prove that it did not have accumulated or current earnings and
profits as of the date of the distribution within the meaning of
section 1.355-2(d)(5)(ii), Income Tax Regs.
b. Corporate Business Purpose
The presence of a valid corporate business purpose may trump
a conclusion that the transaction was used principally as a
device for the distribution of earnings and profits. Sec. 1.355-
2(b)(4),(d)(3)(ii), Income Tax Regs. Section 1.355-2(b)(2),
Income Tax Regs., defines “corporate business purpose” as a “real
and substantial non-Federal tax purpose germane to the business
of the distributing corporation, the controlled corporation, or
the affiliated group * * * to which the distributing corporation
belongs.”
The stronger the evidence of device, such as the presence of
the device factors specified in section 1.355-2(d)(2), Income Tax
Regs., the stronger the corporate business purpose required to
prevent the conclusion that the transaction was used principally
as a device. Sec. 1.355-2(d)(3), Income Tax Regs. The
assessment of the strength of the business purpose must be made
based upon all the facts and circumstances, including, but not
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