Merrill Lynch & Co., Inc. & Subsidiaries - Page 49




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          on Zenz, claiming that “its relevance to this case is at best               
          tangential.”  Petitioner notes that Zenz involved both a tax year           
          prior to the enactment of section 302 and a different factual               
          situation.  In Zenz, the sole shareholder of a corporation sold             
          some of her stock first, and a short time later, the issuing                
          corporation redeemed the remainder of her stock.  Petitioner                
          distinguishes Zenz from the instant case because “The order of              
          sale and subsequent redemption was chosen to reduce taxes--that             
          is, to avoid dividend treatment from the redemption leg”, the               
          redemption completely terminated the taxpayer’s interest in the             
          corporation, and the Commissioner was attempting to reorder the             
          transactions in order to obtain dividend treatment for the                  
          redemption proceeds.  Petitioner urges this Court to limit the              
          application of the Zenz intent-based test to cases where the form           
          of the transactions and the intent of the taxpayer coincide as it           
          did in Zenz and to decline to apply the test in cases such as               
          this where the issue to be decided is “whether a redemption that            
          does not terminate the shareholder’s interest and a later sale              
          that does terminate that interest are sufficiently related to               
          justify treating a non-terminating redemption as part of the                
          later sale transaction.”                                                    



               33(...continued)                                                       
          three tests because the applicable legal standard is that                   
          identified elsewhere in this Opinion.                                       





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