Rev. Rul. 63-260
Distinguished by Rev. Rul. 69-407
A owned all of the stock of X which owned 70 shares of the stock of Y. A also owned the remaining 30 shares of Y stock directly. A contributed 10 shares of his Y stock to X . Immediately thereafter, X distributed all 80 shares of Y stock now held by it to A .
Held , the distribution by X does not qualify as a nontaxable distribution under the provisions of section 355 of the Internal Revenue Code of 1954, because X did not have `control' of Y within the meaning of section 368(c) of the Code immediately before the distribution except in a transitory and illusory sense.
Section 355 of the Code cannot be made to apply to a transaction in which an immediately preceding contribution to capital by the distributor corporation's shareholder is made solely to attempt to qualify the transaction as a nontaxable distribution under that section.