George L. Riggs, Inc. v. Commissioner
United States Tax Court
64 T.C. 474 (1975)
George L. Riggs, Inc. (GLR) (plaintiff) wanted to liquidate its subsidiary corporation, Riggs-Young Corporation (formerly the Standard Electric Time Co.). GLR owned 36 percent of Riggs-Young preferred stock and 72 percent of Riggs-Young common stock. In the months before liquidation, Riggs-Young redeemed all of its preferred stock and the common stock of its minority shareholders. GLR’s ownership of Riggs-Young increased to 96 percent by May 28, 1968. On June 20, 1968, the directors and shareholders of Riggs-Young approved a liquidation and dissolution plan for Riggs-Young. GLR received over $2.2 million in distributions from Riggs-Young as a result of the liquidation. GLR reported the distributions as a gain on its tax return but claimed nonrecognition of the gain under Internal Revenue Code (I.R.C.) § 332. The commissioner of the Internal Revenue Service (IRS) (defendant) assessed a deficiency of about $590,000 on GLR’s tax return. GLR filed a petition for review in the United States Tax Court.
Rule of Law
Holding and Reasoning (Drennen, J.)
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