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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
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-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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