Baker Commodities, Inc., a California Corporation v. Commissioner of Internal Revenue

This is an appeal from a decision of the Tax Court, 48 T.C. 374 (1967), in which the appellant corporation was denied a stepped up basis for assets acquired from the liquidation of three subsidiary corporations, i.e. that appellant was not entitled to use as its basis for the assets received from the subsidiary corporations in liquidation, the same amount that was paid for the stock of these corporations, but that it must use as its basis for the assets received, the same basis they had in the hands of the subsidiary corporations before liquidation. The Tax Court held that appellant was not entitled to § 334(b) (2) basis treatment of assets thus transferred, since the stock in the subsidiary corporations was acquired from “a person the ownership of whose stock would, under section 318(a), be attributed to the person acquiring such stock.” § 334(b) (3) (C). We affirm the decision of the Tax Court.

THE QUESTIONS PRESENTED

There are two issues to be disposed of in this appeal: (1) whether so-called “sidewise” attribution was provided for by § 318 prior to its amendment in 1964, ( Pub.L. 88-554, § 4 (a), 78 Stat. 761 ); and (2) whether a partnership which has sold and transferred…