C12-Chp-07-7-Rev-Rul- 2003-110-Corporate Divisions

C12-Chp-07-7-Rev-Rul- 2003-110-Corporate Divisions -...

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eaefb3a933ab39220daf3fbc7122ef5fc35b0512.doc Page 1 of 2 REV-RUL, 2003FED ¶46,841 Corporate divisions: Business purpose: Competitive position strengthened: Corporate or shareholder purpose: Tax avoidance motive absent. --, Rev. Rul. 2003-110 I.R.B. 2003-46 (October 23, 2003) [ Code Sec. 355 ] Corporate divisions: Business purpose: Competitive position strengthened: Corporate or shareholder purpose: Tax avoidance motive absent. -- The IRS has ruled that, in determining whether a publicly traded corporation's distribution of the stock of a controlled corporation satisfies the business purpose requirement of Reg. §1.355-2(b) that the distribution be motivated, in whole or substantial part, by one or more corporate business purposes, the fact that Code Sec. 355 permits a distributing corporation to distribute the stock of a controlled corporation without recognition of gain does not present a potential for avoidance of federal taxes under Reg. §1.355-2(b) . ISSUE In determining whether a distribution of the stock of a controlled corporation satisfies the business purpose requirement of §1.355-2(b) of the Income Tax Regulations that the distri- bution be motivated, in whole or substantial part, by one or more corporate business pur- poses, does the fact that §355 of the Internal Revenue Code permits a distributing corporation to distribute the stock of a controlled corporation without recognition of gain present a potential for the avoidance of Federal taxes under §1.355-2(b) ? FACTS Distributing is a publicly traded corporation that conducts a pesticides business. Controlled, a wholly owned subsidiary of Distributing, conducts a baby foods business. The pesticides business formulates, manufactures, and markets pesticides for agricultural use. The baby foods business processes and markets baby foods. A significant number of potential customers
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This note was uploaded on 03/09/2012 for the course ACCT 6120 taught by Professor Godfrey,h during the Spring '08 term at UNC Charlotte.

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C12-Chp-07-7-Rev-Rul- 2003-110-Corporate Divisions -...

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