United States v. Transamerica Corporation, Transamerica Corporation v. United States

Transamerica Corporation has brought suit for refund of federal income taxes for the year 1958. From judgment of the District Court for the Northern District of California cross appeals have been taken. The opinion of the District Court, sub nom. Transamerica Corporation v. United States, appears at 254 F.Supp. 504 (1966).

Appeal of the United States

The question presented is the deductibility of expenses incurred by taxpayer Transamerica in carrying out a plan of divestment of banking assets in compliance with the Bank Holding Company Act of 1956, 12 U.S.C. §§ 1841-1848 , and the complementary sections of the Internal Revenue Code, 26 U.S.C. §§ 1101-1103 .

The plan followed by taxpayer involved the organization of Firstamerica Corporation to which taxpayer’s bank assets were transferred in exchange for stock which was then distributed to taxpayer’s stockholders. The details of this plan are fully set forth in the opinion of the District Court.

The District Court rejected the Government’s contention that the dominant purpose, or net effect, of the plan was that of a spin-off, or “D” reorganization, 26 U.S.C. § 368 (a) (1) (D), the expenses of which should be capitalized under…