From our private database of 26,900+ case briefs...
McDonald’s Restaurants of Illinois v. Commissioner
United States Court of Appeals for the Seventh Circuit
688 F.2d 520 (1982)
The McDonald’s Corporation (McDonald’s) entered into negotiations with three men (the sellers) to purchase restaurants from them. For accounting purposes, McDonald’s needed to pay the sellers in McDonald’s stock. However, the sellers would agree to the deal only if they could be assured that they would be able ultimately to end up with cash. The parties agreed to a deal whereby McDonald’s would acquire the companies holding the sellers’ restaurants through a merger and then contribute the restaurants to 27 wholly owned McDonald’s subsidiaries (plaintiffs). In exchange, the sellers would receive McDonald’s common stock and a right to force McDonald’s to register the stock within two years so that the sellers could sell the stock on the open market for cash. The parties consummated the transaction. Shortly thereafter, McDonald’s registered the stock, and the sellers sold it for cash on the open market. The parties treated the transaction as a taxable sale. Accordingly, McDonald’s reported an adjusted basis in the acquired assets equal to the value of the common stock it exchanged for them. The 27 subsidiaries then took depreciation deductions based on those adjusted bases. The Internal Revenue Service (IRS) (defendant) treated the transaction as a tax-free reorganization, recalculated the amount of allowable depreciation deductions, and assessed deficiencies. The United States Tax Court upheld the deficiencies, and the 27 subsidiaries appealed.
Rule of Law
Holding and Reasoning (Cummings, C.J.)
What to do next…
Unlock this case brief with a free (no-commitment) trial membership of Quimbee.
You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 540,000 law students since 2011. Some law schools—such as Yale, Berkeley, and Northwestern—even subscribe directly to Quimbee for all their law students.Unlock this case briefRead our student testimonials
Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.
Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students.Learn about our approachRead more about Quimbee
Here's why 540,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 26,900 briefs, keyed to 983 casebooks. Top-notch customer support.
- The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
- Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
- Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.