312 F2d 393 United States v. Diversified Services Inc P

312 F.2d 393

UNITED STATES of America, Appellant,
DIVERSIFIED SERVICES, INC., as Transferee and Successor of Dr. P. Phillips and Sons, Incorporated, Appellee.

No. 19415.

United States Court of Appeals Fifth Circuit.

January 9, 1963.

Edith House, U. S. Atty., Miami, Fla., Edward F. Boardman, U. S. Atty., Don M. Stichter, Asst. U. S. Atty., Tampa, Fla., Louis F. Oberdorfer, Asst. Atty. Gen., Lee A. Jackson, Harry Baum, Harold C. Wilkenfeld, Attys., Dept. of Justice, Washington, D. C., for appellant.

Albert H. Monacelli, Dunnington, Bartholow & Miller, New York City, William Y. Akerman, Orlando, Fla., Akerman, Senterfitt, Edison & Mesmer, Orlando, Fla., of counsel, for appellee.

Before RIVES, CAMERON and BELL, Circuit Judges.


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The district court, by a completely literal construction of Section 392(b) and 337(c) of the Internal Revenue Code of 1954,1 held that gains from sales made in 1954 by wholly-owned subsidiary corporations, subsequently liquidated and dissolved under a plan of liquidation adopted also subsequently to the sales, are entitled to nonrecognition for income tax purposes, even though the liquidation distributions by the subsidiaries to the parent are tax free. The Tax Court, in an opinion reviewed by the full court,2 disagreed with the holding of the district court and ruled to the contrary. The Second Circuit, in an able opinion by Judge Friendly, concurred in by Judges Swan and Waterman,3 has now affirmed the decision of the Tax Court.


We are in full agreement with the reasoning expressed in the opinion of the Second Circuit. For the reasons stated in that opinion, the judgments of the district court in these consolidated cases are reversed and the causes remanded.


Reversed and remanded.


CAMERON, Circuit Judge, concurs in the result.



26 U.S.C.A. (I.R.C.1954) 392(b), 337(c). The opinion of the district court is reported as Diversified Services v. United States, S.D.Fla., 1961, 192 F.Supp. 571


J. C. Penney Co., Transferee v. Commissioner of Internal Revenue (filed March 6, 1962), 37 T.C. 1013


J. C. Penney Company, Transferee v. Commissioner of Internal Revenue, 2d Cir., 1962, 312 F.2d 65