TAXATION-INCOME TAX-CORPORATION NOT TAXABLE ON A SALE OF PROPERTY BY STOCKHOLDERS FOLLOWING GENUINE LIQUIDATION DISTRIBUTION

The stockholders of a closely held electric utility corporation offered to sell all the corporate stock to a cooperative competitor. The cooperative countered with an offer to buy a part of the corporation's physical assets. Hoping to avoid a heavy corporate capital gains tax, the stockholders caused the corporation to distribute to them in partial liquidation the property in question, and then executed the previously contemplated sale themselves. The commissioner assessed and collected a capital gains tax from the corporation which then sued and recovered the amount of the tax in the court of claims.

On appeal, held, affirmed. United States v. Cumberland Public Service Co., 338 U.S. 451, 70 S.Ct. 280 (1950).