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petitioner’s. This environment, petitioner contends, was caused
by increasing competition from national clinical laboratories,
delivery of service issues, and development of alliances between
large health insurance companies and national clinical
laboratories. Petitioner argues that, based upon these economic
factors, its shareholders and employees became convinced that
petitioner’s clinical laboratory would be forced out of business
within a few years. This belief led the shareholders to sell the
clinical business to NHL and “partner” with NHL to enhance the
competitive position of their remaining anatomic business.
We do not question, and respondent does not dispute, that
the economic factors cited by petitioner may have forced it out
of the clinical business within a few years. Although these
factors may have been the impetus behind the decision to sell the
clinical business in the first instance, such factors do not
demonstrate a corporate business purpose for petitioner’s
decision to distribute the Clinpath stock to its shareholders
before selling the stock to NHL. A transfer of the clinical
laboratory assets directly to Clinpath would have sufficed to
achieve petitioner’s desired result; i.e., to create a new
company containing solely the assets of the clinical business in
order to sell the clinical business with minimum liability to the
buyer. Minimizing the effect of the economic factors cited by
petitioner, however, did not require the nearly simultaneous
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