Rev. Rul. 60-262

A new corporation was organized in 1955 by an individual for the purpose of acquiring the going business of another corporation. The following month, the new corporation purchased all the capital stock of the `going business' corporation, which had no stock connections with the above individual prior to the sale. Within two years after such purchase, the acquiring corporation (parent) liquidated its wholly-owned subsidiary in a transaction to which section 332 of the Internal Revenue Code of 1954 applies. The continuing corporation, under the provisions of section 334(b)(2) of the Code, computed a new `stepped-up' basis for the assets acquired upon the liquidation of its subsidiary, based upon the consideration paid by it for the capital stock of the subsidiary. Held , under these circumstances, since the continuing corporation fulfilled all the requirements of section 334(b)(2) of the Code, it is entitled to the benefits of that section. The fact that the continuing corporation was originally organized by an individual for the purpose of obtaining a `going business' would not operate to deny it the benefits of section 334(b)(2) of the Code.

In similar circumstances the purchase of stock by a new corporation to acquire a `going business' was considered in substance a purchase of assets under the Internal Revenue Code of 1939. See Revenue Ruling 60-246, page 462, this Bulletin, announcing that the Internal Revenue Service will follow the decision of the United States Court of Appeals for the Fifth Circuit in United States v. M.O.J. Corporation , 274 Fed.(2d) 713.

In this connection, the formal steps themselves are significant under the 1954 Code and the element of purpose or intent is immaterial. Accordingly, the continuing corporation is entitled to a `stepped-up' basis in the assets received, equal to the adjusted basis to it of the capital stock of the `purchase' subsidiary corporation. See section 1.334-1(c) of the Income Tax Regulations.