- 44 -
respondent has conceded that Dover UK’s deemed sale of the H&C
assets immediately after the check-the-box liquidation of H&C
constituted a sale of property used in Dover UK’s business within
the meaning of section 1.954-2(e)(3)(ii) through (iv), Income Tax
Regs.18 That result is consistent with the conclusion of the
Court of Appeals for the Second Circuit in Williams v. McGowan,
152 F.2d 570 (2d Cir. 1945), that depreciable property and
inventory that had been part of a business sold shortly after the
partnership conducting the business was terminated retain their
status as non-capital assets in the hands of the individual
seller.
Respondent’s acknowledgment that the business history and
activities of a subsidiary carry over to its parent in connection
with a section 332 liquidation of the subsidiary is also
reflected in section 301.7701-2(a), Proced. & Admin. Regs., which
provides that “if the entity is disregarded, its activities are
treated in the same manner as a sole proprietorship, branch, or
division of the owner”. In the context of a business
organization, a “branch” is defined as a “division of a
business”, and a “division” as an “area of * * * corporate
18 Because H&C’s use of its assets was entirely business
related, that use almost certainly covered more than one-half of
the various periods that, taking into account sec. 1223(2), Dover
UK is deemed to have held those assets. Therefore, that use is
deemed to be the use for which those assets were held for
purposes of sec. 1.954-2(a)(3), Income Tax Regs.
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