TSN Liquidating Corp. v. United States
United States Court of Appeals for the Fifth Circuit
624 F.2d 1328 (1980)
TSN Liquidating Corp. (TSN) (plaintiff) sought to sell its subsidiary, Community Life Insurance Company (Community), to Union Mutual Life Insurance Company (Union Mutual) through a sale of stock. One condition of the stock-purchase agreement between TSN and Union Mutual was that Community was to dispose of certain unwanted assets (mostly capital stock of small public companies) prior to the sale. To satisfy this condition, Community declared a dividend of the unwanted assets to be received by TSN just prior to closing the sale. TSN reported the receipt of the assets from Community as dividends on its tax return. The Internal Revenue Service (IRS) (defendant) audited TSN and treated the distribution of assets from Community to TSN as an integral part of the sale to Union Mutual, which increased TSN’s tax burden. TSN paid the additional tax, filed a claim for a refund, and brought an action against the IRS in district court. The district court found in favor of the IRS. TSN appealed to United States Court of Appeals for the Fifth Circuit.
Rule of Law
Holding and Reasoning (Randall, J.)
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