Opinion ID: 334653
Heading Depth: 2
Heading Rank: 2

Heading: The Distribution Test

Text: 39 Because the distribution of money away from the control of the transferor corporation and into shareholder control usually results in a direct economic benefit to the shareholder, the Sammons net distribution test, see Sammons, 472 F.2d at 451, 453-54, is closely related to the question of actual direct economic benefit which we have just discussed. In fact, neither party here discussed the distribution test, nor did the Tax Court, although everyone argued about the problem of actual economic benefit. However, we think that in the light of our conclusions in Sections II and III.A., supra, it suffices to say that when the present transactions are seen as a taxable shareholder exchange of stock, it is unmistakable that a net distribution of funds from Kuper Volkswagen has occurred and that the transferred funds came within the direct control of the Kuper Volkswagen shareholders who used them for their own benefit as shareholders. Thus, under Sammons, dividend treatment is proper, and to this extent the Tax Court's decision is reversed.