Rev. Rul. 63-233

The Internal Revenue Service will follow the recent decisions of the United States Court of Appeals for the Fourth Circuit in the case of Commissioner v. Universal Leaf Tobacco Co. , 318 Fed. (2d) 658 (1963); and of the United States Court of Appeals for the Fifth Circuit in the case of Commissioner v. Bertha Gassie McDonald , Transferee, et al., 320 Fed.(2d) 109 (1963).

Those decisions held that gain realized by a corporation from the sale or exchange of property pursuant to a plan of complete liquidation, and not recognized for Federal income tax purposes by virtue of sections 332 and 337 of the Internal Revenue Code of 1954, is not wholly exempt from Federal income tax under section 265 of the Code. Therefore, state income tax paid on such gain is a deductible expense.

Cases pending on this issue will be disposed of on the basis of the above decisions.

Revenue Ruling 60-236, C.B. 1960-2, 109, is hereby revoked.

¹ Based on Technical Information Release 510, dated Sept. 25, 1963.