United States of America, Appellant, v. Diversified Services, Inc., As Transferee and Successor of Dr. P. Phillips and Sons, Incorporated, Appellee, 312 F.2d 393 (5th Cir. 1963)

 Annotate this Case
US Court of Appeals for the Fifth Circuit - 312 F.2d 393 (5th Cir. 1963) 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.

PER CURIAM.

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.

 1

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

 2

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

 3

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

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.