Canal Corp. v. Comm'r
United States Tax Court
W, a wholly owned subsidiary of parent, P, proposed to transfer its assets and most of its liabilities to a newly formed LLC in which W and GP, an unrelated corporation, would have ownership interests. P hired S, an investment bank, and PWC, an accounting firm, to advise it on structuring the transaction with GP.
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W, a wholly owned subsidiary of parent, P, proposed to transfer its assets and most of its liabilities to a newly formed LLC in which W and GP, an unrelated corporation, would have ownership interests. P hired S, an investment bank, and PWC, an accounting firm, to advise it on structuring the transaction with GP. P also asked PWC to issue an opinion on the tax consequences of the transaction and conditioned the closing on receiving a "should" opinion from PWC that the transaction qualified as tax free. PWC issued an opinion that the transaction should not be treated as a taxable sale but…
1Opinion of the Court
Kroupa, Judge:
Respondent determined a $183,458,9811 deficiency in petitioner’s (Chesapeake)2 Federal income tax for 1999, the year at issue. Respondent asserts in his amended answer that Chesapeake owes a $36,691,796 substantial understatement of income tax penalty under section 6662(a)3 for 1999. We must determine whether Chesapeake’s subsidiary’s contribution of its assets and most of its liabilities to a newly formed limited liability company and the simultaneous receipt of a $755 million distribution should be characterized as a disguised sale, requiring Chesapeake to recognize a $524…
2Cases cited14 opinions
- United States v. BoyleSupreme Court of the United States · 1985
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- Frank C. Pasternak Judith Pasternak (92-1681/1682) Anthony J. Cutaia Diane Cutaia David G. Koehlinger (92-1681) v. Commissioner of Internal RevenueCourt of Appeals for the Sixth Circuit · 1993
- Glenn A. Mortensen v. Commissioner of Internal RevenueCourt of Appeals for the Sixth Circuit · 2006
- New Phoenix Sunrise Corp. v. Comm'rUnited States Tax Court · 2009
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