- 28 -
3. Conclusion
There is substantial evidence of device in this case, which
is not overcome by substantial evidence of nondevice or by proof
that petitioner and Clinpath lacked current or accumulated
earnings and profits. We hold, therefore, that the distribution
of Clinpath stock failed to satisfy the requirements of section
355(a)(1).12
IV. Tax Treatment of the Distribution of Clinpath Stock
Section 311(a) provides that, except as provided in section
311(b), no gain or loss shall be recognized to a corporation on a
nonliquidating distribution, with respect to its stock, of its
stock or property. Section 311(b)(1), however, requires a
corporation to recognize gain on nonliquidating distributions of
appreciated property to its shareholders as though such property
were sold to the distributee at its fair market value.
It is well settled that fair market value is the price at
which property would change hands between a willing buyer and a
willing seller, neither being under any compulsion to buy or sell
and both having reasonable knowledge of the relevant facts.
11(...continued)
evidence of corporate business purpose was insufficient to
overcome the compelling evidence of device in this case.
12Because we hold that the sec. 355(a)(1) requirement is not
met, we do not separately decide whether the independent
corporate business purpose requirement of sec. 1.355-2(b)(1),
Income Tax Regs., or the continuity of proprietary interest
requirement of sec. 1.355-2(c)(1), Income Tax Regs, has been met.
Page: Previous 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 NextLast modified: May 25, 2011