TAXATION - CAPITAL GAINS TAX (REVENUE ACT OF 1928) - REORGANIZATIONS - DEFINITION OF A PARTY TO A REORGANIZATION

Authors

Milton A. Kramer, University of Michigan Law SchoolFollow

Abstract

Although "certainty" is one of the most desirable features of taxation, that quality has been conspicuously absent in regard to the portions of the 1928 Revenue Act which deal with capital gains in corporate reorganizations. In the four situations which the act sets forth as constituting a reorganization, capital gains arising therefrom are exempt from tax computation, the general purpose being to remove any impediment to normal corporate adjustments and to prevent the recognition of gains or losses until they are actually realized. However, this provision soon became an invitation for ingenious counsel to arrange the sales of corporate assets in the form of reorganizations, thereby obtaining the benefit of an exemption never contemplated by the legislature. Although an obvious attempt at such practice was thwarted in at least one instance by the Supreme Court of the United States, numerous doubtful transactions have caused a good deal of uncertainty as to what now constitutes a reorganization within the meaning of the act, especially under clauses (A) and (B) of section 112 (i)(1). Several of the major disputed issues will be briefly summarized.

Recommended Citation

Milton A. Kramer, TAXATION - CAPITAL GAINS TAX (REVENUE ACT OF 1928) - REORGANIZATIONS - DEFINITION OF A PARTY TO A REORGANIZATION, 36 Mich. L. Rev. 1176 (1938).
Available at: https://repository.law.umich.edu/mlr/vol36/iss7/7