Francis C. Whelan, U. S. Atty., for Southern area Dist. out of California, by the Loyal Age. Keir, Asst. You. S. Atty., Master, Income tax Part, Los angeles, Cal., for accused.
Thereafter, into April 19, 1957, Hollywood merged on the House. The organization life out of Movie industry terminated but the whole organization is went on rather than disturbance given that an integral part of plaintiff relationship, Household.
All procedural standards was basically complied with because of the Plaintiff. It Court keeps jurisdiction from the advantage regarding twenty eight You.S.C. 1346(a) (1) and 1402(a) (1), and you may 26 U.S.C. 7422. The income tax, if any, is the fact away from Hollywood, but Family would-be accountable because the transferee possesses paid such income tax once the transferee.
Webster, ordered all a great make sure inventory off Movie industry Offers and Loan Connection (hereinafter known as “Hollywood”)
You to number one thing and lots of supplementary facts is actually showed from the pleadings, however, a decision on the number one matter dumps the outcome within its totality.
When you look at the March out of 1957, Plaintiff Household Savings and you will Mortgage Organization, transferee (hereinafter known as “Home”) with their attorney and you may agent, Thomas C
The main concern is: When you look at the a great merger, do the newest put aside to have money owed of matched company feel accelerated on money considering the merger? *135 Specifically here, if the pre-merger set aside for bad debts away from Movie industry by April 19, 1957, be included in its money with its last come back?
The difficulties once the framed regarding the pleadings and also the reputation of your situation are on the foundation one to Movie industry was an entirely-had part out of House and you will, ergo, the merger is pursuant so you’re able to twenty six You.S.C. 332. (Every part recommendations hereinafter are to the internal Cash Password out of 1954). However, this approach disregards the uncommon business framework regarding a discount and you may financing organization within the regulations of your State from Ca. Whenever you are all of the be certain that stock from Movie industry was owned by Home, the fresh new depositors off Movie industry, whom, less than Ca legislation, have been called “shareholders,” had a directly to choose, a directly to elect people in the brand new Board from Administrators (yet not most such as for example Board), and the choose of a couple-thirds ( 2/step three rds) of such investors are a dependence on the new merger. Area 332 makes it necessary that the brand new mother or father business end up being the proprietor from inventory “having about 80 % of your own full joint voting energy of the many kinds from stock entitled to vote.” When you find loans Vineyards yourself lower than California legislation this new depositor-shareholder’s notice was denominated “shares” in place of “inventory,” the latest handling factor is not necessarily the make of the fresh new depositor-shareholder’s notice but the top-notch legal rights, choices and you may benefits connected with eg interest. Just like the a keen affirmative a few-thirds vote of the depositor-shareholders had to accept the newest merger, and since eg depositor-investors met with the directly to choose a certain number of players of the Board of Administrators, up coming except if House also possessed 80% of this kind out-of share entitled to choose, the latest merger could not qualify around Sec. 332 once the a liquidation away from a part. Household did not very own any one of this type of show; therefore, Area 332 was not applicable.
Adopting the merger of Hollywood and you can Home, the newest depositor-shareholders away from Movie industry became new depositor-investors from Home. Afterwards, new depositor-shareholders from Hollywood had the same expert-rata proceeded interest in Household as they got up until the merger on a great consolidated basis. The fresh new merger anywhere between Movie industry and you can Household is actually a statutory merger reorganization as the you to label can be used into the Sec. 368(a) (1) (A). Less than one concept, there’s adequate continuity interesting.
Within the a good reorganization, the new set-aside to possess bad debts of one’s merged agency isnt accelerated into the income due to the merger.