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under * * * section 346(a) is a distribution resulting from a
genuine contraction of the corporate business”.
The revenue ruling, after noting that “[t]he business
activities of a subsidiary are not generally considered to be
business activities of its parent corporation”, recognizes that,
under a section 332 liquidation (where the carryover basis rules
of section 334(b)(1) apply), “[s]ection 381, in effect integrates
the past business results of the subsidiary (as represented by
its earnings and profits, net operating loss carryover, etc.)
with those of the parent corporation.” Rev. Rul. 75-223, 1975-1
C.B. at 110. The revenue ruling then states:
For most practical purposes, the parent corporation,
after the liquidation of the subsidiary, is viewed as
if it has always operated the business of the
liquidated subsidiary. Consequently, there is no
meaningful distinction, for purposes of section
346(a)(2), between a corporation that distributes the
assets of a division, or the proceeds of a sale of
those assets, and a parent corporation that distributes
assets of a subsidiary, or the proceeds of a sale of
such assets, received from the subsidiary in a
liquidation governed by sections 332 and 381. [Id.]
Accordingly, the ruling holds that, in situations 1 and 2, “the
fact that the distributions * * * were attributable to assets
that were used by a subsidiary rather than directly by the parent
will not prevent the distribution from qualifying as a ‘genuine
contraction of the corporate business’ of the parent within the
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