Jerry S. Payne - Page 22

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          of its assets to another corporation controlled by the sole                 
          shareholder of both corporations in exchange for stock of the               
          transferee corporation followed by a distribution of the                    
          transferee stock to such shareholder, all pursuant to a plan of             
          reorganization.  Secs. 368(a)(1)(D), (c), 354(b)(1)(A) and (B).13           
          Respondent also appears to concede that the transfer of the                 
          club’s operation from 2618 to JKP meets the statutory                       
          requirements for an “F” reorganization:  “a mere change in                  
          identity, form, or place of organization of one corporation,                
          however effected”, which respondent acknowledges may encompass a            
          new corporation’s mere acquisition of the assets of the old                 
          corporation, H. Conf. Rept. 97-760, 1982-2 C.B. 600, 634-635.               
          Respondent argues, however, that, because JKP sold the club                 
          within 3 months of taking over its operation, the transaction may           
          have failed to meet the nonstatutory requirement of continuity of           
          business enterprise (COBE), applicable to any reorganization                
          described in section 368(a) and firmly embedded in the                      
          regulations under section 368.  See sec. 1.368-1(d), Income Tax             

               13  Because petitioner already owned the stock of JKP there            
          was no need for an actual exchange of 2618's assets for JKP stock           
          followed by a distribution of the stock to petitioner.  As                  
          respondent acknowledges, “[t]he law is well settled that where              
          shareholders of the transferor corporation already own all of the           
          stock of the transferee corporation, the issuance of further                
          stock for exchange and distribution is not required.”  See                  
          DeGroff v. Commissioner, 54 T.C. 59, 71 n.7 (1970), affd. per               
          curiam 444 F.2d 1385 (10th Cir. 1971), and the cases cited                  

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