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election involved a deemed section 332 liquidation of H&C, see
sec. 301.7701-3(g)(1)(iii) and (2)(ii), Proced. & Admin. Regs.,
petitioner concludes that respondent’s position violates the
principle of Rauenhorst v. Commissioner, 119 T.C. 157, 182-183
(2002), that “taxpayers should be entitled to rely on revenue
rulings in structuring their transactions, and they should not be
faced with the daunting prospect of the Commissioner’s disavowing
his rulings in subsequent litigation”.
The revenue rulings cited by petitioner involve the question
of whether the liquidation of a subsidiary followed by a pro rata
distribution of the proceeds of the sale of the subsidiary’s
assets to the parent’s shareholders in partial redemption of the
parent’s stock may qualify as a partial liquidation of the parent
under former section 346(a)(2).9
The seminal ruling upon which petitioner relies is Rev. Rul.
9 At the time of the issuance of the revenue rulings cited
by petitioner, secs. 331 and 336 governed the tax consequences to
the shareholders and distributing corporation, respectively, of a
partial (or complete) liquidation of the corporation, and sec.
346(a) defined the term “partial liquidation”. Sec. 222 of the
Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L.
97-248, 96 Stat. 478, amended (1) sec. 346 to eliminate the
definition of “partial liquidation” contained therein and (2)
secs. 331 and 336 to omit the reference in each to a partial
liquidation. Sec. 222 of TEFRA also amended (1) sec. 302(e) so
that, essentially, it embodies the former sec. 346(a) definition
of a partial liquidation, and (2) sec. 302(b)(4), so that it
treats a redemption of stock from a non-corporate shareholder in
connection with a partial liquidation of the distributing
corporation as a distribution in part or full payment in exchange
for the stock under sec. 302(a).
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