- 29 -
301.17 On the record before us, we find that the disputed trans-
action, including the purported issuance to petitioner of ITC’s
preferred stock and the purported redemption by ITC of that
stock, should be disregarded for tax purposes. On that record,
we further find there was no ITC preferred stock owned by peti-
tioner that could have been redeemed by ITC. On the record
before us, we conclude that sections 302 and 301 have no applica-
tion to, and do not constitute substantial authority under
section 6662(d)(2)(B)(i) and the regulations thereunder for
petitioner’s tax treatment of, the disputed transaction.
In addition to relying on sections 302 and 301 as substan-
tial authority for its tax treatment of the disputed transaction,
petitioner relies on Estate of Crellin v. Commissioner, 203 F.2d
812 (9th Cir. 1953), affg. 17 T.C. 781 (1951), and Soreng v.
Commissioner, 158 F.2d 340 (7th Cir. 1946), affg. 4 T.C. 870
(1945). Both of those cases involved the declaration of a
dividend, and not the purported issuance and the purported
immediate redemption of stock under section 302. Estate of
Crellin and Soreng are materially distinguishable from the
instant case and do not constitute substantial authority for
17Instead of having petitioner purportedly contribute money
to ITC and having ITC declare a dividend payable to petitioner as
two steps of the transaction in question, the steps of the
disputed transaction consisting of the purported issuance of
ITC’s preferred stock and the purported immediate redemption of
that stock were used in order to help avoid the Canadian nonresi-
dent withholding tax on dividends.
Page: Previous 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 NextLast modified: May 25, 2011