- 26 -
Section 304(b) then helpfully sets out six paragraphs, ten
subparagraphs, and dozens of clauses and subclauses to explain
section 304(a). If these weren’t clear enough, there are also
seven columns of single-spaced regulations. Secs. 1.304-1
through 1.304-5, Income Tax Regs. The result is a rococo fugue
of tax law.7
To begin de-composing this fugue, we note that section
304(c) and section 1.304-5(b), Income Tax Regs., define “con-
trol,” a term of critical importance in this case. The regula-
tion tells us that in deciding whether section 304(a)(1) applies,
we look to see if the taxpayers involved (1) control both the
issuing and acquiring corporation, (2) transfer stock in the
6(...continued)
ment should fail is that section 304 was amended effective June
8, 1997 and had a transition provision that exempted binding
deals already reduced to writing even if not yet closed. Howev-
er, the amending language that the Hursts cite did not affect the
first sentence of section 304 quoted above, which has been in the
Code and unchanged for a half century at least. See Internal Re-
venue Code of 1954, ch. 736, sec. 304, 68A Stat 89. It is this
sentence that might affect the tax treatment of the RHI stock
sale.
7 There is a custom of referring to the interplay of section
302 and section 318’s family attribution rules as a “baroque
fugue,” traceable to 1 Bittker & Eustice, Federal Income Taxation
of Corporations and Shareholders, par. 9.04[3] at 9-35 (7th ed.
2002) (so many points and counterpoints as to be a “baroque
fugue”). See also W. Rands, “Corporate Tax: The Agony and the
Ecstasy,” 83 Neb. L. Rev. 39, 69 (2004) (“This provides some
relief in class. We take a five minute break from our work to
discuss whatever a ‘fugue’ is. Usually, most of us do not know,
but occasionally a classical music enthusiast tries to enlighten
us.”). Adding section 304 makes the fugue rococo.
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