Rev. Rul. 60-246

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 substantially similar cases.

In this case the court held that the purchase by the taxpayer of the stock of several corporations for the purpose of liquidating such corporations and acquiring their `going businesses', to be operated by the taxpayer with as little change as possible, was in substance the purchase of the assets, and that, accordingly, the basis of the property acquired by the taxpayer upon the liquidation of such corporations was the amount paid for the stock.

The court concluded, `The justification for so construing the language of Section 112(b)(6) of the Internal Revenue Code of 1939 as to exclude the purchase of specific property through the purchase of stock in its corporate owner is that what results in the `receipt by a corporation of property' is not a `distribution in complete liquidation of another corporation,' but is in real substance the purchase of the property, which is accomplished, for reasons beyond the control of the purchaser, by the purchase of stock and dissolution of the corporate owner. This is just as true if `the property' is the going business of the transferor as if it is a flour mill or oil well or other specific property of the transferor.'

The acquisition of assets through the purchase-liquidation method in the instant case was by a corporation owned by an entirely different group of stockholders from the group which owned the acquired corporations.

¹ Based on Technical Information Release 235, dated June 9, 1960.