George L. Riggs, Inc. v. Commissioner
Facts
Petitioner owned 72.13 percent of the common stock of Standard Electric Time Co., later renamed Riggs-Young Corp., and also held preferred stock that had no voting power during the relevant period. In December 1967, Standard's shareholders approved the sale of substantially all corporate assets, and in early 1968 Riggs-Young redeemed all preferred stock and later made a tender offer to most common shareholders. By May 9, 1968, petitioner owned at least 80 percent of Riggs-Young's outstanding stock, and by May 28, 1968, it owned 95.6 percent of the common stock. On June 20, 1968, Riggs-Young's board and shareholders formally adopted a plan of complete liquidation, and petitioner received liquidating distributions but reported the resulting gain as nonrecognized under section 332(a).
Issue
When was Riggs-Young's plan of liquidation adopted for purposes of section 332(b)? More specifically, did the corporation adopt the plan before petitioner reached 80 percent ownership, or only after petitioner owned at least 80 percent of the stock?
Rule
For section 332 purposes, the date of adoption of a plan of liquidation is ordinarily the date the shareholders adopt the resolution authorizing distribution of all assets in cancellation or redemption of all stock. Informal adoption is possible, but it requires some kind of definitive determination to achieve dissolution; a mere general, conditional, or future intent to liquidate does not constitute adoption of a plan.
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For purposes of determining whether Section 332 applies to Lakeview's receipt of Riverton's assets, when was the plan of liquidation most likely adopted?