Jerry S. Payne - Page 26

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          less than 3 years later), and then liquidated.  Because the                 
          transferee corporation continued to conduct the old business, the           
          Court sustained our finding that the transaction had a valid                
          business purpose and that it qualified as a nondivisive “D”                 
          reorganization under the 1939 Code predecessor of section                   
          368(a)(1)(D).  The Court distinguished cases in which the intent            
          was that the transferee corporation immediately make a                      
          liquidating distribution of the assets received from the                    
          transferor corporation, stating as follows:                                 
               But in the present case, petitioners’ plan contemplated                
               that the new company would carry on the * * *                          
               business, and this was done.  Although petitioners’                    
               intention was to dispose of the * * * [business]                       
               eventually, the fact that a going business was                         
               transferred and operated left the new company and                      
               petitioners, its shareholders, in a position where they                
               stood to gain or lose from operations just as before                   
               the transfer; if business conditions warranted it, the                 
               business could have been continued indefinitely.  [Id.                 
               at 649; emphasis added.]                                               
               We hold that the reasoning of the First Circuit Court of               
          Appeals in Lewis v. Commissioner, supra, applies to this case and           
          that the transfer of the club from 2618 to JKP possessed COBE.              
               C.  Existence of a Distribution Taxable Under Section 356(a)           
               Respondent argues that, even if 2618's transfer of the club            
          to JKP constituted a “D” reorganization, petitioner was                     
          nevertheless in receipt of $40,011 of “boot” taxable as long-term           

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