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FEDERAL INCOME, ESTATE & GIFT TAX PROJECT 1 (PRELIMINARY DRAFT 198D, May 1956)

handle is hein.ali/aliftp0208 and id is 1 raw text is: PD 198D Mo.-,) Iqs-6 -STOCK ATTRI13UTION The following criticisms and questions regarding the several Code sections involving stock attribution have been advanced by various persons and groups and are herewith presented in order to obtain an idea of how the committee feels about the validity of those criticisms, and also what further criticisms the committee would like to add. l, Should there ever be attribution between partners? VWhere? 2. It has been suggested that the partnership attribution of section 318 is too broad in the following respects: (a) There is uncertainty as to what constitutes a partnership- -how to differentiate between partnerships and joint ventures, etc. (b) It seems unwise to attribute to junior partners stock owned by senior partners. (c) It seems unrealistic to attribute stock owned by partners in a company completely unrelated to the partnership. (d) Perhaps the areas in which there is partnership attribution should be limited and 100% attribution provided for in those areas. (e) Under present rules of attribution between partners and part- nerships it is not clear what criteria are to be used in determining how to measure an interest in the partnership, i. e. , by right to capital or income or both. 3. The question of whether attribution is a two-way street is not answered in most instances. For example, suppose two shareholders own 10% each in a company and one shareholder is the father of the other and that all of the father's stock is redeemed and 1% of the son's stock is redeemed, will the redemption of the son's stock qualify as a substantially disproportionate redemption by virtue of the attribution rules?

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