Independent Oil Co. v. Commissioner
United States Tax Court
X Co. in 1930 transferred substantially all of its assets to petitioner, a newly organized corporation, in exchange for all of petitioner's capital stock, which had a stipulated fair market value. Seventy-five percent of this stock was immediately transferred by X Co. to Vacuum Oil Co. and the remaining 25 percent was placed in escrow where it was available to Vacuum at the latter's option.
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X Co. in 1930 transferred substantially all of its assets to petitioner, a newly organized corporation, in exchange for all of petitioner's capital stock, which had a stipulated fair market value. Seventy-five percent of this stock was immediately transferred by X Co. to Vacuum Oil Co. and the remaining 25 percent was placed in escrow where it was available to Vacuum at the latter's option. Vacuum then issued 22,978 shares of its stock to X Co. in exchange for the 75 percent of petitioner's stock. X Co. distributed the Vacuum stock to its shareholders and was dissolved shortly thereafter.…
1Opinion of the Court
OPINION.
Keen, Judge:
In computing its excess profits tax for 1940 petitioner used the invested capital method in determining its excess profits credit. The petitioner was entitled to use either the income or the invested capital method in computing this credit, whichever resulted in the larger credit. In the computation of equity invested capital under the invested capital method, petitioner included “property paid in for stock” at cost, viz., the fair market value of the petitioner’s stock paid for the old company’s property, namely $3,156,558.67.3
Respondent asserts that under the invested…
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