Francis C. Whelan, You. S. Atty., to have South Dist. out of Ca, by Faithful Age. Keir, Asst. You. S. Atty., Master, Taxation Point, La, Cal., to have defendant.

After that, with the April 19, 1957, Hollywood matched into Home. The corporate lifestyle from Movie industry terminated but its whole team is actually went on in the place of disruption as the part of plaintiff organization, Domestic.

The procedural conditions were complied with because of the Plaintiff. It Courtroom has actually jurisdiction from the virtue out of twenty eight You.S.C. 1346(a) (1) and you will 1402(a) (1), and you may twenty-six U.S.C. 7422. Money tax, or no, would be the fact out of Movie industry, but Domestic is liable once the transferee and has paid down such as income tax as the transferee.

Webster, bought every an excellent make certain stock out-of Hollywood Discounts and Financing Association (hereinafter named “Hollywood”)

You to definitely first material and lots of supplementary points is actually presented of the pleadings, however, a choice towards top issue gets rid of possible with its totality.

In February away from 1957, Plaintiff Household Discounts and you will Mortgage Association, transferee (hereinafter also known as “Home”) with their attorneys and you will broker, Thomas C

The primary concern is: Within the good merger, does the brand new put aside having bad debts of your own combined corporation end up being accelerated into money because of the merger? *135 Specifically right here, should the pre-merger set-aside to have bad debts away from Hollywood since April 19, 1957, be added to its income within the final get back?

The problems since framed throughout the pleadings and reputation of the outcome are on the foundation you to definitely Movie industry try an entirely-possessed part from House and you will, ergo, brand new merger was pursuant so you’re able to twenty six U.S.C. 332. (Most of the point recommendations hereinafter are to the inner Cash Code away from 1954). Although not, this approach disregards ab muscles uncommon business build from an economy and you may mortgage relationship within the laws and regulations of the State away from California. When you are the guarantee inventory of Hollywood are belonging to Domestic, brand new depositors off Hollywood, whom, below California rules, are known as “shareholders,” had a straight to vote Indiana installment loans, a directly to decide members of the fresh new Board from Directors (yet not a majority of including Panel), together with vote regarding one or two-thirds ( 2/3 rds) of these investors was a significance of the fresh new merger. Section 332 makes it necessary that this new moms and dad business be the holder out-of inventory “possessing at the very least 80 per cent of your complete mutual voting strength of all the categories out-of inventory permitted choose.” When you find yourself around California law this new depositor-shareholder’s desire are denominated “shares” in the place of “stock,” the fresh handling grounds is not the label of the latest depositor-shareholder’s focus but the quality of legal rights, tastes and you may privileges related to such as attention. As the a keen affirmative two-thirds choose of your own depositor-shareholders needed to agree the brand new merger, and since such as for instance depositor-investors had the straight to elect a certain number of participants of your own Board away from Administrators, up coming unless of course Household together with possessed 80% of this kind out of show eligible to vote, new merger could not be considered not as much as Sec. 332 since the a liquidation from a part. Family didn’t individual any of these display; hence, Point 332 was not applicable.

Following merger out of Hollywood and you may House, this new depositor-shareholders out-of Hollywood became new depositor-shareholders away from Family. Afterwards, brand new depositor-shareholders out of Hollywood met with the exact same expert-rata continuing need for Household as they got before the merger toward an excellent consolidated basis. Brand new merger anywhere between Movie industry and Household was a statutory merger reorganization given that you to definitely term is utilized inside the Sec. 368(a) (1) (A). Less than one idea, there was sufficient continuity of interest.

Inside good reorganization, brand new reserve getting money owed of your own merged firm isnt accelerated to the money because of the merger.