Opinion
No. 77-2238.
Argued September 12, 1978.
Decided September 15, 1978. Rehearing In Banc Denied October 31, 1978.
Robert A. Schnur, Milwaukee, Wis., for petitioners-appellants.
Ernest J. Brown, Tax Div., Dept. of Justice, Washington, D.C., for respondent-appellee.
Appeal from the United States Tax Court.
Before CASTLE, Senior Circuit Judge, and TONE and BAUER, Circuit Judges.
This taxpayer appeal presents two issues:
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?
This and other references herein are to the Internal Revenue Code, Title 26, U.S.C.
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).
AFFIRMED.