Francis C. Whelan, You. S. Atty., to own Southern area Dist. out of Ca, by Dedicated Elizabeth. Keir, Asst. You. S. Atty., Head, Tax Part, Los angeles, Cal., to have accused.

After that, on the April 19, 1957, Hollywood matched to your Domestic. The corporate life out-of Hollywood terminated but the whole organization try went on instead interruption because the part of plaintiff association, Domestic.

All proceeding standards was basically complied with because of the Plaintiff. So it Courtroom features legislation of the advantage away from twenty-eight You.S.C. 1346(a) (1) and you may 1402(a) (1), and you can 26 U.S.C. 7422. Money income tax, or no, would be the fact out-of Hollywood, however, Family would-be responsible as the transferee and has paid like tax just like the transferee.

Webster, ordered all an excellent guarantee inventory of Movie industry Savings and you can Loan Organization (hereinafter described as “Hollywood”)

One number 1 material and lots of second issues is displayed by the pleadings, however, a choice to your number 1 procedure dumps the situation within the totality.

Within the February out-of 1957, Plaintiff Domestic Offers and you can Financing Connection, transferee (hereinafter known as “Home”) employing attorneys and representative, Thomas C

An important issue is: Within the a merger, really does the fresh new put aside to possess money owed of one’s combined enterprise be expidited towards the earnings as a result of the merger? *135 Specifically right here, should the pre-merger put aside getting money owed from Movie industry since April 19, 1957, be included in the money within its latest go back?

The issues due to the fact presented from the you could look here pleadings as well as the reputation for happening take the cornerstone you to definitely Movie industry was a completely-owned part away from Domestic and you will, for this reason, the fresh new merger was pursuant to twenty six U.S.C. 332. (Every point sources hereinafter should be the inner Cash Password regarding 1954). Yet not, this process disregards ab muscles strange corporate design out of a cost savings and you can loan organization under the laws and regulations of your Condition regarding California. When you’re every make certain stock away from Hollywood was belonging to House, the fresh new depositors away from Movie industry, whom, around Ca laws, have been called “shareholders,” had a straight to vote, a directly to choose members of the brand new Board regarding Administrators (but not a lot of such as for instance Panel), together with vote of a couple of-thirds ( 2/3 rds) of these shareholders try a dependence on the new merger. Area 332 requires that new mother enterprise function as manager from stock “having at the least 80 % of one’s total combined voting power of the many kinds off stock entitled to choose.” If you find yourself around Ca laws the newest depositor-shareholder’s interest is denominated “shares” as opposed to “stock,” the latest dealing with basis is not necessarily the make of the latest depositor-shareholder’s focus nevertheless quality of liberties, needs and you may benefits associated with such as for instance attention. Since an affirmative a couple of-thirds choose of one’s depositor-investors was required to agree the fresh new merger, and since such as depositor-investors met with the right to decide a certain number of professionals of Panel from Directors, next unless House in addition to owned 80% of this type from display eligible to choose, the latest merger couldn’t be considered around Sec. 332 as the an excellent liquidation out of a part. House did not own some of these types of display; for this reason, Part 332 wasn’t appropriate.

Following merger from Hollywood and you will Home, brand new depositor-shareholders of Movie industry turned the new depositor-shareholders away from Domestic. Thereafter, this new depositor-shareholders off Hollywood encountered the exact same specialist-rata continuing demand for Household while they got before the merger toward a great consolidated base. The latest merger anywhere between Hollywood and you can Household was a statutory merger reorganization due to the fact one label can be used during the Sec. 368(a) (1) (A). Below any concept, there’s adequate continuity of interest.

In the a good reorganization, brand new reserve to own money owed of your own combined agency isnt expidited for the money as a result of the merger.