Ronald A. Anderson and Marilyn J. Anderson, Cross-Appellees v. Commissioner of Internal Revenue, Cross-Appellant

This taxpayer appeal presents two issues:

1. When § 422 * stock options given to employees of subsidiary corporations to acquire stock of the parent are exercised, is the difference between the fair market value of the stock and the purchase price a proper charge against the earnings and profits of the subsidiary corporation rather than of the issuing parent corporation?

2. In determining whether a § 301 ordinary corporate distribution constitutes a dividend under § 316(a)(2) and thus is included in the recipient’s gross income, § 301(c), are the earnings and profits of the distributing…