Rev. Rul. 56-655

A corporation owned by two brothers is engaged in the furniture and appliance business. The furniture branch is managed by one brother and the appliance branch is managed by the other. Because of fundamental differences in policy, the two brothers plan to transfer the assets of the existing corporation to two new corporations, one to be owned by one brother and one by the other. Although each brother presently owns 50 percent of the stock of the existing corporation, the net worth of the furniture branch exceeds that of the appliance branch. To equalize the two, it will be necessary to transfer some cash previously used in the furniture branch to the new appliance corporation. Held : the transfer of cash to one corporation to make the value of assets distributed to it correspond to the value of assets distributed to the other corporation will not prevent the proposed transaction from coming within the provisions of sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1954.