Thurgood Marshall

“ For if a transaction failed to qualify under one of those sections solely because of the attribution rules, it would according to taxpayer's argument nonetheless qualify under § 302 (b) (1) . We cannot agree that Congress intended so to nullify its explicit directive. We conclude, therefore, that the attribution rules of § 318 (a) do apply; and, for the purposes of deciding whether a distribution is 'not essentially equivalent to a dividend' under § 302 (b) (1) , taxpayer must be deemed the owner of all 1,000 shares of the company's common stock. ”

“ It was clearly proper for Congress to treat distributions generally as taxable dividends when made out of earnings and profits and then to prevent avoidance of that result without regard to motivation where the distribution is in exchange for redeemed stock.
We conclude that that is what Congress did when enacting § 302 (b) (1) . If a corporation distributes property as a simple dividend, the effect is to transfer the property from the company to its shareholders without a change in the relative economic interests or rights of the stockholders. ”

“ Congress, however, soon recognized that even without a prior stock dividend essentially the same result could be effected whereby any corporation, 'especially one which has only a few stockholders, might be able to make a distribution to its stockholders which would have the same effect as a taxable dividend.' H.R.Rep. ”