C12-Chp-06-2-Rev-Rul-1968-348-Cost-Recovery

C12-Chp-06-2-Rev-Rul-1968-348-Cost-Recovery - REV-RUL...

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Revenue Ruling 68-348, 1968-2 CB 141 SECTION 346.--PARTIAL LIQUIDATION DEFINED 26 CFR 1.346-1: Partial liquidation. (Also Sections 331, 1012; 1.331-1, 1.1012-1.) A series of corporate liquidation distributions must be prorated among a shareholder's separate blocks of stock. [Text] Advice has been requested concerning the proper Federal income tax treatment of amounts received by a shareholder pursuant to a series of distributions in complete liquidation of a corporation under the circumstances described below. On October 1, 1966, X corporation adopted a plan of complete liquidation. Under the plan X intended to distribute all of its assets, other than those required to meet claims, to its sole shareholder, A, within the 12- month period beginning on the date of adoption of the plan. A, a calendar year taxpayer, had acquired 40 percent of the 200 outstanding shares of X stock (first block) at a cost of 80 x dollars (or 1 x dollar per share) on January 1, 1960, and had acquired the remaining 60 percent of X stock (second block) at a cost of 360 x dollars (or 3 x dollars per share) on February 10, 1963. On November 1, 1966, X sold all its assets for 1,000 x dollars (500 x dollars cash and negotiable notes with a fair market value of 500 x dollars). On December 1, 1966, X distributed 500 x dollars to A pursuant to its plan of liquidation. At that time the adjusted basis of each of A' s blocks of stock in X was its cost. On January 2, 1967,
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C12-Chp-06-2-Rev-Rul-1968-348-Cost-Recovery - REV-RUL...

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