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distribution of Clinpath stock to its shareholders. The purpose
of separating the clinical laboratory assets in preparation for
the sale to NHL and shielding NHL from liability was achieved as
soon as the clinical business was contributed to Clinpath by
petitioner in exchange for Clinpath stock. See generally sec.
1.355-2(b)(5), Example (3), Income Tax Regs.
The changing economic environment, therefore, does not by
itself constitute a valid corporate business purpose for the
distribution of Clinpath stock to petitioner’s shareholders or
constitute evidence of nondevice.
ii. Petitioner’s Status as a
Professional Corporation
The second purported corporate business purpose arises from
petitioner’s claim that Oklahoma State law mandated the final
structure of the spinoff transaction. Petitioner essentially
argues that it was constrained from selling, and NHL was
prevented from purchasing, petitioner’s stock because
petitioner’s status as a professional corporation prevented NHL
from owning any interest in it.
Petitioner’s argument concerning its status as a
professional corporation is without merit. Even if petitioner
were precluded from selling its stock to nonphysicians as
petitioner contends, such a bar would justify only petitioner’s
decision to transfer its clinical business to a separate general
business corporation, i.e., Clinpath; it would not lend support
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