J.E. Seagram Corp. v. Commissioner
United States Tax Court
104 T.C. 75 (1995)
- Written by Eric Miller, JD
Facts
J. E. Seagram Corp. (Seagram) (plaintiff) was interested in acquiring Conoco. As part of a tender offer, Seagram purchased 32 percent of the outstanding stock in Conoco for approximately $2.6 billion. At roughly the same time, DuPont purchased 46 percent of Conoco’s stock. The remaining 22 percent of Conoco’s stock was owned by the public. Conoco was merged into DuPont, at which time Seagram and other shareholders received DuPont stock in exchange for their Conoco stock. The value received by Seagram was approximately $2 billion. Seagram reported no loss for financial-accounting purposes, but it did report a short-term capital loss of approximately $600,000 for tax purposes. The Commissioner of Internal Revenue (the commissioner) (defendant) blocked the loss on the ground that the merger had been a tax-free reorganization. Seagram challenged this argument in the United States Tax Court, contending that the 32 percent of Conoco stock it acquired disrupted the requisite continuity of interest. Both sides moved for summary judgment.
Rule of Law
Issue
Holding and Reasoning (Nims, J.)
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