(CN) – Merrill Lynch’s sale of corporate assets among its subsidiaries must be treated as a distribution in exchange for stock, the U.S. Tax Court ruled.
Merrill Lynch sought to terminate its ownership interest in Merrill Lynch Capital Resources (MLCR), which sold off its stock in other subsidiaries of the parent company.
On its income taxes, Merrill Lynch claimed a capital loss of $466,985, treating the proceeds of the cross-chain stock sales as dividend payments to MLCR.
Judge Marvel ruled instead that the stock sale should be treated as a distribution.
In order to claim a loss, Marvel ruled, “the persons in control must actually receive property in exchange for the transfer of their issuing corporation stock.”