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Keywords

corporation

willcorporationrespondent

Related Cases

Romy Hammes, Inc. v. Commissioner of Internal Revenue, 68 T.C. 900

Facts

In 1968, four corporations (A, B, C, and D) merged into a fifth corporation, Nevada. The premerger corporations had different business activities and shareholder interests. After the merger, Nevada incurred a net operating loss in 1970 and sought to carry this loss back to offset the premerger income of Illinois, one of the merged corporations. The court needed to determine if the merger qualified as a reorganization under section 368(a)(1)(F).

The shareholders of the merging corporations and the survivor, Nevada, as of December 29, 1967, were as follows: … After the merger, the merging corporations were designated as divisions, and each kept separate books and records to reflect its continuing operations.

Issue

Whether Nevada, as the successor by merger, is entitled to carry back a portion of its net operating loss to the 1967 premerger income of Illinois.

The sole issue to be decided is whether Nevada is entitled to carry back its 1970 net operating loss to the 1967 premerger income of Illinois.

Rule

The merger must qualify as a reorganization under section 368(a)(1)(F) for Nevada to carry back its net operating loss to Illinois' premerger income. An (F) reorganization is defined as a mere change in identity, form, or place of organization.

An (F) reorganization is defined as ‘a mere change in identity, form or place of organization, however effected.’

Analysis

The court analyzed the merger and found that it did not meet the requirements for an (F) reorganization. The merging corporations were engaged in disparate business activities, and there was a significant difference in the shareholders' proprietary interests before and after the merger. The court emphasized that the lack of continuity in business operations and shareholder interests precluded the merger from qualifying as an (F) reorganization.

In rejecting petitioner's argument that the merger here constituted an (F) reorganization, we also note that the different corporations merged were engaged in disparate business activities.

Conclusion

The court concluded that the merger did not qualify as a reorganization under section 368(a)(1)(F), and therefore, Nevada was not entitled to carry back its net operating loss to offset the premerger income of Illinois.

Decision will be entered for the respondent.

Who won?

The Commissioner of Internal Revenue prevailed in the case because the court upheld the determination that the merger did not qualify as a reorganization under the relevant tax code provisions.

Respondent has determined a deficiency in petitioner's Federal income tax for the taxable year 1967 in the amount of $19,210.85.

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Libson Shops, Inc. v. Koehler, 353 U.S. 382, 77 S.Ct. 990, 1 L.Ed.2d 924, 57-1 USTC P 9691, 51 A.F.T.R. 43, 1957-2 C.B. 891

Rountree Cotton Co., Inc. v. C.I.R., 12 Fed.Appx. 641, 2001 WL 305567, 87 A.F.T.R.2d 2001-1454, 2001-1 USTC P 50,316, 2001 DJCAR 1680

Dunn v. Commissioner of Internal Revenue, 70 T.C. 715

Arrowsmith v. Commissioner of Internal Revenue, 344 U.S. 6, 73 S.Ct. 71, 97 L.Ed. 6, 52-2 USTC P 9527, 42 A.F.T.R. 649, 1952-2 C.B. 136

Haserot v. C. I. R., 46 T.C. 864