Lockwood’s Estate v. Commissioner
United States Court of Appeals for the Eighth Circuit
350 F.2d 712 (1965)
Facts
Thorval and Margaret Lockwood (the Lockwoods) owned Lockwood Grader Corporation (Lockwood Grader) as sole stockholders. Lockwood Grader did business as a corporation throughout the United States from at least the year 1946. Lockwood Grader conducted intermittent business in Maine from at least the year 1949. In 1956, the Lockwoods spun off part of their Lockwood Grader business into a new corporation, Lockwood Graders of Maine, Inc (Maine, Inc.), under Internal Revenue Code (I.R.C.) § 355. The Lockwoods exchanged assets of Lockwood Grader for stock of Maine, Inc. The Lockwoods reported the spin-off of Maine, Inc. as a tax-free transaction under I.R.C. §355. The commissioner of the Internal Revenue Service (IRS) (defendant) found that the spin-off was not tax-free because the Lockwoods did not conduct active business in Maine for the five years prior to the distribution of stock. The commissioner stipulated that the Lockwoods met all other requirements of § 355. The Lockwoods’ estate (plaintiff) appealed to the United States Court of Appeals for the Eighth Circuit.
Rule of Law
Issue
Holding and Reasoning (Vogel, J.)
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