Francis C. Whelan, You. S. Atty., to have South Dist. out of Ca, by the Faithful Elizabeth. Keir, Asst. U. S. Atty., Head, Taxation Section, Los angeles, Cal., having accused.
Thereafter, into the April 19, 1957, Movie industry blended with the Family. The organization lifetime off Movie industry ended but the whole business was went on rather than disturbance once the part of plaintiff association, Household.
The procedural requirements was basically complied with because of the Plaintiff. It Legal has actually legislation from the virtue out of twenty eight You.S.C. 1346(a) (1) and 1402(a) (1), and you can twenty-six You.S.C. 7422. The amount of money taxation, if any, is that of Hollywood, however, House is responsible due to the fact transferee and also paid for example taxation while the transferee.
Webster, purchased all of the a good be sure inventory away from Movie industry Savings and you can Mortgage Relationship (hereinafter described as “Hollywood”)
One number 1 topic and several secondary situations are demonstrated because of the pleadings, but a choice to your number 1 material gets rid of the scenario in totality.
From inside the March regarding 1957, Plaintiff Household Discounts and you may Mortgage Organization, transferee (hereinafter referred to as “Home”) through its lawyer and you will agent, Thomas C
The main issue is: When you look at the a good merger, does brand new put aside having bad debts of the matched agency getting accelerated on the money because of the merger? *135 Particularly here, should the pre-merger put aside to own bad debts of Movie industry as of April 19, 1957, be included in their earnings within its latest get back?
The difficulties since presented about pleadings and reputation for the scenario take the basis that Hollywood is actually a completely-owned part from Family and you may, ergo, the fresh merger try pursuant to twenty-six U.S.C. 332. (The part sources hereinafter should be the interior Revenue Password out of 1954). not, this process disregards the very unusual business construction of a cost savings and loan association within the regulations of the Condition of Ca. When you’re all of the ensure inventory away from Hollywood try owned by Family, the latest depositors out-of Hollywood, exactly who, under California laws, have been called “shareholders,” had a right to vote, a right to elect members of the fresh Board away from Directors (but not a majority of eg Board), and the vote from a couple of-thirds ( 2/3 rds) of such investors is actually an importance of the fresh merger. Section 332 makes it necessary that the fresh new mother or father corporation become manager off inventory “possessing at the least 80 percent of your full joint voting energy of all of the kinds out of inventory permitted vote.” When you find yourself significantly less than California rules the brand new depositor-shareholder’s attract was denominated “shares” in place of “inventory,” the controlling basis isn’t the make of the latest depositor-shareholder’s notice nevertheless the quality of rights, tastes and you may benefits pertaining to particularly attention. Due to the fact a keen affirmative one or two-thirds choose of your own depositor-shareholders had to agree brand new merger, and since particularly depositor-shareholders encountered the directly to elect a specific amount of members of one’s Board from Administrators, next until Home together with had 80% of this kind of share permitted choose, the new merger could not qualify not as much as Sec. 332 because a good liquidation out-of a subsidiary. House didn’t own any one of such express; for this reason, Point 332 was not appropriate.
Adopting the merger off Movie industry and you may Family, the newest depositor-investors away from Hollywood became the newest depositor-shareholders off Home. Thereafter, the fresh new depositor-investors regarding Hollywood had the exact same expert-rata continuous demand for House as they got before merger on a consolidated base. The fresh new merger anywhere between Movie industry and you will Household is a legal merger reorganization while the you to name is used from inside the Sec. 368(a) (1) (A). Not as much as people theory, discover sufficient continuity of great interest.
In a reorganization, the set-aside to possess money owed of one’s matched organization is not accelerated into income due to loan places Quasset Lake the merger.
