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In the absence of a statutory provision prescribing its tax consequences,
the complete liquidation of a corporation might be
looked upon as a transfer by each stockholder of his stock in exchange
for the liquidating distribution. His profit or loss (i.e., the
difference between the adjusted basis of his stock and the value of
the liquidating distribution) would then be reported either as capital
gain or loss or as ordinary income or loss, depending upon
whether the stock was a capital asset in his hands and on whether
the transaction was regarded as a sale or exchange within the
meaning of section 1222. Another possibility, in the absence of
statute, would be to treat the liquidating distribution as a dividend
(taxable as ordinary income) to the extent of the corporation's
earnings and profits; and to treat the balance of the liquidating
distribution as a payment in exchange for the stock, with gain or
loss to be computed accordingly.

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