Court Opinion

ID: 9448243
Source: CourtListenerOpinion
Date Created: 2023-08-03 23:27:01.495242+00
Date Added: 2024-06-11T17:31:20.393639
License: Public Domain

On Petition for Rehearing
PER CURIAM.
The petition for rehearing in this case expresses strongly the petitioner’s conviction that this Court failed to recognize the bona fides of the transaction. In denying this petition we wish, again, to make clear that we did not base the decision on a lack of good faith in the parties to the transaction. It is true that we said, “we should guard against giving force to a purported transfer which gives off an unmistakably hollow sound when it is tapped”. But this statement was set off (in the same sentence) against the other extreme: “These tax avoidance implications do not constitute a license to courts to distort the laws or to write in new provisions.” Throughout the opinion we were careful to say that our decision was not based on any lack of good faith in the parties to the transaction, and that we did not pass on the legal effect of the transaction outside of the tax frame of reference. We do not question the integrity of the parties or suggest that there was any flim-flam. We do not doubt the business purposes of the transaction. The decision does not purport to question the effectiveness of the transaction in protecting the stockholders against the holding in Robinson v. Wangeman, 5 Cir., 1935, 75 F.2d 756. But we hold and reaffirm that for tax purposes there was not a sufficient severance of the corporation’s ownership over the assets for the transaction to create the tax consequence that when the corporation reacquired the assets it took *91them with a stepped-up basis. The transaction is analogous to a, Clifford trust, valid under state law but ineffective for tax purposes to remove the trust income from the settlor’s taxable income. Helvering v. Clifford, 1940, 309 U.S. 331, 60 S.Ct. 554, 84 L.Ed. 788. It is ORDERED that the petition for rehearing filed in the above styled and numbered cause be, and the same is hereby
Denied.