Tax News

CCH (cch.taxgroup.com) reports:

  Stock acquired by a trust that owned an insurance policy in exchange for ownership rights as part of the demutualization of the insurance company had value but that value could not be determined at the time of acquisition. The trust did not realize any income on the sale of the stock because the amount received was less than its cost basis in the insurance policy as a whole.

  The "open transaction" exception to Reg. §1.61-6 applied because the policyholder's ownership rights did not have a determinable fair market value at the time the insurance policy was acquired. The ownership rights were inextricably tied to and indivisible from the insurance policy. The fact that no specific costs were allocated to the ownership rights indicated that those rights related to values associated with the insurance business as a whole and did not mean that those rights should be valued at zero.

E.A. Fisher, FedCl, 2008-2 USTC ¶50,481

Other References:

 
Code Sec. 61

  CCH Reference - 2008FED ¶5700.01

  CCH Reference - 2008FED ¶5700.17

 
Code Sec. 1001

  CCH Reference - 2008FED ¶29,225.153

  Tax Research Consultant

  CCH Reference - TRC SALES: 9,104.10
CCH Reference - TRC SALES: 36,404
CCH Reference -
TRC VALUE: 1,108