Family Discounts and Mortgage Connection v. United states, 223 F. Supp. 134 (S.D. Cal. 1963)

Francis C. Whelan, U. S. Atty., to possess Southern area Dist. off Ca, because of the Devoted E. Keir, Asst. You. S. Atty., Chief, Taxation Part, Los angeles, Cal., getting offender.

Thereafter, for the April 19, 1957, Hollywood combined for the House. The organization life of Movie industry ended but the whole team is actually went on instead of disruption since an integral part of plaintiff organization, Home.

All procedural conditions have been complied which have by the Plaintiff. Which Court features jurisdiction by virtue from 28 U.S.C. 1346(a) (1) and you may 1402(a) (1), and you may twenty-six U.S.C. 7422. The cash income tax, if any, is that out-of Hollywood, however, Home might possibly be accountable given that transferee possesses paid down eg taxation given that transferee.

Webster, purchased all of the an excellent ensure inventory out-of Movie industry Discounts and you may Loan Association (hereinafter called “Hollywood”)

That no. 1 situation and lots of second facts was demonstrated by the pleadings, but a decision to your number 1 material disposes of the scenario in totality.

Into the February off 1957, Plaintiff House Coupons and you will Loan Connection, transferee (hereinafter known as “Home”) with the lawyer and you can broker, Thomas C

An important issue is: In good merger, really does the set aside getting money owed of matched organization getting accelerated on money because of the merger? *135 Particularly right here, if the pre-merger set aside for bad debts off Hollywood since April 19, 1957, be added to its money with its latest return?

The issues as the framed from the pleadings therefore the history of the actual situation take the basis one Hollywood is a completely-owned subsidiary from Home and, therefore, new merger are pursuant to help you twenty-six You.S.C. 332. (All the point recommendations hereinafter are to the inner Money Code away from 1954). Although not, this process disregards ab muscles strange corporate design out of a savings and you may financing organization beneath the statutes of County out of Ca. If you’re most of the make sure inventory out-of Movie industry are belonging to Home, the newest depositors regarding Movie industry, just who, lower than California laws, are called “investors,” got a straight to choose, a directly to decide people in the brand new Board regarding Directors (although not most such Panel), as well as the choose regarding two-thirds ( 2/3 rds) of these shareholders is actually a significance of the newest merger. Area 332 necessitates that the fresh father or mother company function as owner off inventory “possessing about 80 percent of your complete mutual voting power of all kinds off inventory eligible to choose.” When you are around California rules the latest depositor-shareholder’s notice was denominated “shares” instead of “stock,” new controlling foundation is not necessarily the model of the fresh new depositor-shareholder’s appeal nevertheless quality of liberties, choice and you may benefits about instance focus. Once the a keen affirmative one or two-thirds vote of your own depositor-investors needed to approve the payday loan Vero Lake Estates fresh new merger, and since instance depositor-shareholders encountered the right to elect a specific amount of participants of Board from Administrators, next except if Domestic and additionally owned 80% of this type off show entitled to vote, new merger cannot qualify not as much as Sec. 332 as a great liquidation out of a part. Family didn’t very own any of such express; thus, Section 332 wasn’t appropriate.

Adopting the merger out-of Hollywood and you may Home, new depositor-investors off Movie industry became the latest depositor-shareholders regarding Domestic. Thereafter, the newest depositor-investors of Hollywood encountered the same expert-rata persisted demand for Household as they got up until the merger towards a good consolidated basis. The merger anywhere between Movie industry and you may Family was a statutory merger reorganization while the one to identity is employed inside Sec. 368(a) (1) (A). Around one theory, there is certainly enough continuity of interest.

Into the a beneficial reorganization, brand new set-aside having money owed of one’s blended enterprise is not accelerated to the money because of the merger.