United States v. Diversified Services, Inc., as Transferee and Successor of Dr. P. Phillips and Sons, Incorporated

The district court, by a completely literal construction of Section 392(b) and 337(c) of the Internal Revenue Code of 1954, 1 held that gains from sales made in 1954 by wholly-owned subsidiary corporations, subsequently liquidated and dissolved under a plan of liquidation adopted also subsequently to the sales, are entitled to nonrecognition for income tax purposes, even though the liquidation distributions by the subsidiaries to the parent are tax free. The Tax Court, in an opinion reviewed by the full court, 2 disagreed with the holding of the district court and ruled to the contrary. The…