Merrill Lynch & Co., Inc. & Subsidiaries - Page 58




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          balance of the purchase price owed to the Nashville and Jasper              
          shareholders.                                                               
               The sole issue for decision was whether the amounts received           
          by the taxpayers in 1970 and 1971 from Ronnie in exchange for               
          their stock in Nashville and Jasper were taxable as capital gains           
          under section 302,35 or as dividends under section 301.  The                
          parties agreed that section 304 applied to the stock acquisitions           
          in question and that, therefore, the transfer of Nashville and              
          Jasper stock to Ronnie must be characterized as a redemption                
          through the use of related corporations.  The parties disagreed             
          only with respect to the application of section 302.  The                   
          taxpayers contended that the redemptions qualified as sales under           
          section 302(a) because they met the requirements of either                  
          section 302(b)(1) or (2).  The taxpayers argued that the 1970               
          redemption was but one step in an overall plan to redeem their              
          interest in Nashville and Jasper that ended in 1972 with the                
          second public offering, and it was not the essential equivalent             
          of a dividend.                                                              
               This Court rejected the taxpayers’ argument, concluding that           
          the record did not contain any compelling evidence of an overall            
          financial plan covering both the first and the second public                
          offerings.  No formal written plan for the funding of the                   



               35Relevant Code provisions were from the Internal Revenue              
          Code of 1954.                                                               





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