Francis C. Whelan, U. S. Atty., having Southern Dist. out of California, by the Dedicated Elizabeth. Keir, Asst. You. S. Atty., Master, Income tax Part, La, Cal., to own accused.
Thereafter, into April 19, 1957, Hollywood combined on the Household. The organization lives from Hollywood ended however, their entire team was continued rather than interruption due to the fact part of plaintiff association, Domestic.
All of the proceeding criteria have been complied that have of the Plaintiff. This Judge has jurisdiction by virtue from 28 You.S.C. 1346(a) (1) and 1402(a) (1), and you may 26 You.S.C. 7422. The money income tax, if any, would be the fact away from Movie industry, but Home is accountable because transferee and has paid such as income tax just like the transferee.
Webster, ordered all the the make certain inventory away from Movie industry Savings and you can Financing Connection (hereinafter known as “Hollywood”)
You to definitely primary thing and many secondary affairs is shown by pleadings, however, a choice on first question dumps happening in entirety.
In the February of 1957, Plaintiff House Savings and you may Financing Association, transferee (hereinafter also known as “Home”) and their attorneys and broker, Thomas C
The primary concern is: Inside the a good merger, do the fresh set aside getting bad debts of merged corporation end up being accelerated toward income due to the merger? *135 Especially right here, should the pre-merger set-aside having bad debts out-of Movie industry since April 19, 1957, be included in their income with its final go back?
The difficulties while the framed about pleadings and the reputation for the fact take the foundation you to definitely Hollywood is actually a wholly-had subsidiary away from Household and, therefore, the merger is pursuant in order to twenty six You.S.C. 332. (The area recommendations hereinafter should be the inner Funds Code out-of 1954). Yet not, this approach disregards the very unusual corporate build out of a savings and you will loan connection beneath the regulations of one’s County out of Ca. When you’re the make official website sure inventory of Hollywood is belonging to Home, the latest depositors regarding Movie industry, just who, significantly less than Ca legislation, are known as “investors,” got a straight to vote, a directly to elect people in the newest Board out-of Directors (however a majority of such as Board), plus the vote of two-thirds ( 2/3 rds) of such shareholders is a need for the merger. Part 332 requires that the fresh mother or father corporation function as the holder out of stock “having at least 80 per cent of your total joint voting electricity of all of the categories away from inventory entitled to vote.” While below California law the fresh new depositor-shareholder’s appeal are denominated “shares” as opposed to “inventory,” new controlling grounds is not necessarily the make of the fresh new depositor-shareholder’s interest however the top-notch legal rights, choice and rights related to instance desire. Because a keen affirmative a few-thirds vote of depositor-investors had to agree the new merger, and because such as for example depositor-investors had the directly to elect a certain number of players of your Board away from Administrators, then unless of course Domestic along with possessed 80% of this kind away from express entitled to vote, the fresh merger cannot be considered less than Sec. 332 since a great liquidation out-of a part. Household did not very own any one of these display; therefore, Area 332 was not relevant.
After the merger out-of Hollywood and Family, this new depositor-shareholders out of Hollywood turned into the newest depositor-investors off Home. After that, the latest depositor-shareholders out-of Hollywood met with the exact same professional-rata continued interest in Family as they got till the merger toward an excellent consolidated base. The fresh merger ranging from Movie industry and you may Home was a legal merger reorganization since you to title is utilized into the Sec. 368(a) (1) (A). Lower than any theory, discover adequate continuity of interest.
In a good reorganization, the fresh set aside for money owed of your matched agency is not accelerated for the earnings due to the merger.