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III. Analysis of the Nine Cross-Chain Sales
A. In General
Each party claims that the applicable legal standard is
clear and that the legal standard, when applied to the facts,
supports a decision in that party’s favor. The parties rely on
many of the same cases to support their respective positions.
The parties’ arguments, however, are so diametrically opposite
regarding their interpretation of the cases that we must turn to
an examination of the principal cases on which both parties
rely.34 A careful examination of the pertinent facts and
holdings of these cases is necessary to respond adequately to the
parties’ detailed and often tortured parsing of these cases in
support of their respective arguments.
34Petitioner also relies on several anticipatory dividend
cases to bolster its arguments regarding the cross-chain sales.
See TSN Liquidating Corp., Inc. v. United States, 624 F.2d 1328
(5th Cir. 1980); Litton Indus., Inc. v. Commissioner, 89 T.C.
1086 (1987); Gilmore v. Commissioner, 25 T.C. 1321 (1956); Coffey
v. Commissioner, 14 T.C. 1410 (1950); Rosenbloom Fin. Corp. v.
Commissioner, 24 B.T.A. 763 (1931). In each of the anticipatory
dividend cases decided by this Court, we held that a
corporation’s distribution of a dividend to a shareholder before
the shareholder sold his stock was taxable as a dividend and not
as part of the later stock sale. The dividend transactions did
not involve the exchange of stock for consideration. We agree
with respondent that the anticipatory dividend cases are
distinguishable from this case, and we do not consider them
further. See Bittker & Eustice, Federal Income Taxation of
Corporations and Shareholders, par. 8.07[2][a], at 8-66 (7th ed.
2002) (“In order to obtain the hoped-for dividend result, it is
important that the selling shareholder not surrender any of its
target stock to the corporation because use of the redemption
format will likely trigger sale treatment.”)
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