LETTER OF TRANSMITTAL WASHINGTON, December 23, 1957. CHAIRMAN, House of Representatives, Washington, D. C. MY DEAR MR. CHAIRMAN: I am transmitting herewith a report by an advisory group appointed by the Subcommittee on Internal Revenue Taxation to study subchapter C of the Internal Revenue Code of 1954, relating to corporate distributions and adjustments. This report is accompanied by the Subchapter C Advisory Group proposed amendments. The advisory group was appointed by the subcommittee on November 28, 1956, to assist the subcommittee in its study of subchapter C of the 1954 Code. The advisory group consists of the following members: Norris Darrell, chairman, C. Rudolf Peterson, vice chairman, Edwin S. Cohen, Marvin K. Collie, Kenneth W. Gemmill, Samuel J. Lanahan, and Leonard L. Silverstein. Neither the report nor the proposed amendments have been considered or approved by the Subcommittee on Internal Revenue Taxation, or any member thereof. The committee has scheduled public hearings commencing January 7, 1958. This report and the accompanying proposed amendments are among the subjects to be considered in such hearings. Respectfully submitted. WILBUR D. MILLS, Chairman, Subcommittee on Internal Revenue Taxation. 2493 LETTER OF SUBMITTAL DECEMBER 23, 1957. Hon. WILBUR D. MILLS, Chairman, Subcommittee on Internal Revenue Taxation of the House of Representatives, Washington, D. C. MY DEAR MR. CHAIRMAN: We are pleased to submit to you herewith our report on subchapter C of the Internal Revenue Code of 1954. Subchapter C presents some of the most difficult and perplexing problems arising under the Internal Revenue Code. The provisions of this subchapter are so interrelated that, generally speaking, no change can safely be made in one provision without careful consideration of the effect on other provisions. We have endeavored to the best of our ability, during the time available to us, to find the most suitable solutions, in keeping with the basic policy of subchapter C, to the problems presented by that subchapter. Nevertheless, we believe that our conclusions can in some respects be improved upon with further study and consideration. The conclusions expressed in our report are therefore not presented as final and definitive but as subject to modification and improvement. We hope that before definitive action is taken sufficient time will be afforded to enable interested persons to make a thorough study of our report and the proposed amendments and to submit their comments and suggestions. Our report explains the changes in subchapter C we recommend for consideration as the result of our studies to date, together with related changes in other parts of the code. It also refers to certain matters as to which we have not recommended statutory amendments but which we believe warrant consideration. It does not discuss all matters relating to subchapter C which we have considered; and we contemplate giving further attention to certain of these matters, as well as to the recommendations contained in the report, with a view toward submission of such supplementary report as may seem appropriate. Our report is accompanied by a document setting forth the proposed statutory amendments. The proposed amendments are presented in bill print form, with numbered lines, in order to facilitate study and comment. In determining upon our recommendations we have sought to balance so far as practicable the desirable objectives of (i) removing unintended benefits and hardships under subchapter C, (ii) effecting greater coordination and consistency between its various interrelated provisions, (iii) reducing the importance of form upon the tax consequences where substantially identical results are obtained, and (iv) achieving greater clarity and understandability of this intricate subchapter and, to the extent consistent with the basic approach reflected therein, greater simplicity in concept. 20675-58-pt. 3-5 2495 GENERAL REVENUE REVISION We have not attempted in our report or the proposed amendments to deal with the problem of effective dates of the proposed statutory changes. In general, we believe that statutory changes should be made prospective only. Except in the limited areas where it is expressly stated otherwise, nothing contained in our report or the proposed amendments is intended to constitute an expression of views or to give rise to an inference as to the proper interpretation of existing law. In submitting our report, we desire to express our appreciation of the helpful cooperation we received from the staff of the Joint Committee on Internal Revenue Taxation, the Treasury Department and the Internal Revenue Service, representatives of which attended many of our meetings for the purpose of supplying information. We wish also to acknowledge our indebtedness to the American Law Institute and the coordinating committee of the Institute and the American Bar Association Section of Taxation for their helpful studies and reports with respect to matters dealt with in subchapter C, and to members of certain committees of the American Bar Association Section of Taxation, the Association of the Bar of the City of New York and the American Institute of Certified Public Accountants for their unofficial informal suggestions. Finally, we wish to express our gratitude to Mr. Edwin S. Cohen, one of our members, who, as counsel to our group, assumed a heavier than normal share of the burden in connection with the preparation of our report and the proposed amendments, to Mr. Fred M. Ringel who contributed helpful assistance, to Mr. Lincoln Arnold who advised us in connection with drafting problems and to Mr. Arnold C. Johnson of the staff of the Joint Committee on Internal Revenue Taxation who served as our secretary. Respectfully submitted. |