583 F2d 953 Anderson v. Commissioner of Internal Revenue

583 F.2d 953

78-2 USTC P 9708

Ronald A. ANDERSON and Marilyn J. Anderson,
Petitioners-Appellants, Cross-Appellees,

No. 77-2238.

United States Court of Appeals,
Seventh Circuit.

Argued Sept. 12, 1978.
Decided Sept. 15, 1978.

Robert A. Schnur, Milwaukee, Wis., for petitioners-appellants.

Ernest J. Brown, Tax Div., Dept. of Justice, Washington, D. C., for respondent-appellee.

Before CASTLE, Senior Circuit Judge, and TONE and BAUER, Circuit Judges.


This taxpayer appeal presents two issues:

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1. When § 422* stock options given to employees of subsidiary corporations to acquire stock of the parent are exercised, is the difference between the fair market value of the stock and the purchase price a proper charge against the earnings and profits of the subsidiary corporation rather than of the issuing parent corporation?


2. In determining whether a § 301 ordinary corporate distribution constitutes a dividend under § 316(a)(2) and thus is included in the recipient's gross income, § 301(c), are the earnings and profits of the distributing corporation to be determined as of the close of the fiscal year without diminution in the amount of a § 302(a) redemption distribution made during the year?


We answer both questions in the affirmative.


In a case presenting questions of such difficulty and so ably briefed and orally argued on both sides, we would ordinarily expect, and indeed be expected, to issue a published opinion. After studying the briefs and hearing the oral argument, however, in this "recondite matter," as counsel for the government aptly described it in oral argument, we find ourselves not only in agreement with, but unable to improve upon, the Tax Court's analysis of the two issues presented. We therefore affirm the judgment for the reasons stated by the Tax Court in its opinion ruling on these issues, reported at 67 T.C. 522, 543-570 (1977).




This and other references herein are to the Internal Revenue Code, Title 26, U.S.C