Court Opinion

ID: 9458023
Source: CourtListenerOpinion
Date Created: 2023-08-04 20:40:52.406016+00
Date Added: 2024-06-11T17:35:36.722955
License: Public Domain

McCREE, Circuit Judge
(concurring in part and dissenting in part).
I agree with the decision of the majority to reverse the judgment of the Tax Court on the question whether the real estate subsidiaries were engaged in the active conduct of a trade or business for the five years preceding the spin-off. And, I agree that this result necessarily determines the second issue raised by appellee, i. e., whether the controlled corporations and the distributing corporation were engaged in the active conduct of a trade or business after the spin-off.
However, I would remand on the question whether the transaction was used principally as a device for the distribution of the earnings and profits of the distributing corporation or the controlled corporations. The fact that there may have been valid business reasons for the spin-off does not, in my opinion, necessarily foreclose a finding that the transaction was used as a “device” for distributing earnings and profits. There may have been other means of separating the real estate operations from the trucking operations that would not have resulted in placing the shareholders of the distributing corporation in a position to realize capital gains on the earnings and profits of the real estate subsidiaries by selling Crown stock while maintaining their interests in the trucking companies. The Tax Court should be permitted to apply its expertise to this question. Moreover, a determination whether a transaction was used principally as a device in this context is a factual one: it entails finding an “ultimate fact” by making certain inferences from the “primary facts,” see NLRB v. Hudson Motor Car Company, 128 F.2d 528, 532 (6th Cir. 1942), a reasoning process not to be undertaken initially by this court but by the Tax Court. Kisting v. Commissioner of Internal Revenue, 298 F.2d 264, 269 (8th Cir. 1962). Finally, I observe that the majority is deciding the “device” issue without the benefit of briefing and argument by appellee, who urged us to remand for determination of the issues not decided by the Tax Court should we reverse on the first issue. I believe this third issue to be sufficiently complex to justify, at the very least, affording ap-pellee an opportunity to brief and argue it.