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more than vague anticipation that the sale of ML Leasing’s stock
would occur. The facts establish the existence of a firm and
fixed plan on the part of Merrill Parent, ML Leasing, ML Asset
Management, and Merlease to engage in a multistep transaction
specifically designed to dispose of petitioner’s proprietary
leasing business outside of the consolidated group while
eliminating gain on the transaction through basis adjustments
resulting from the interplay of section 304 with the consolidated
return regulations.
We find that a firm and fixed plan to dispose of ML Leasing
outside the consolidated group existed on the date of the 1986
cross-chain sale, and that the 1986 cross-chain sale, the
distribution of a dividend of the gross sale proceeds, and the
sale of ML Leasing were integrated steps in that plan. Because
the 1986 cross-chain sale (the deemed section 304 redemption),
when integrated with the sale of ML Leasing’s stock, resulted in
the complete termination of ML Leasing’s actual and constructive
ownership interest in Merlease (the issuing corporation), see
sec. 304(b), we hold that the redemption qualified under section
302(b)(3), and that, therefore, the redemption shall be treated
as a payment in exchange for stock under section 302(a) and not
as a dividend under section 301.
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