United States Tax Court T.C. Memo. 2023-146 CHARLES G. BERWIND TRUST FOR DAVID M. BERWIND, DAVID M. BERWIND, D. MICHAEL BERWIND, JR.; GAIL B. WARDEN, LINDA B. SHAPPY AND VALERIE L. PAWSON, TRUSTEES, ET AL., 1 Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent ————— Docket Nos. 26218-08, 26219-08, Filed December 4, 2023. 26220-08, 26221-08, 26222-08. ————— John William Schmehl, Thomas S. Biemer, Marc Alan Feller, and Benjamin S. Bolas, for petitioners. Philip S. Yarberough and John Anthony Guarnieri, for respondent. CONTENTS MEMORANDUM FINDINGS OF FACT AND OPINION ..................... 4 FINDINGS OF FACT .............................................................................. 7 1. In 1963, Charles G. Berwind, Sr., established trusts to hold the stock of Berwind Corporation for his four children. .............. 7 1 Cases of the following petitioners are consolidated herewith: Duncan Warden and Gail Warden, Docket No. 26219-08; Russell Shappy, Jr., and Linda B. Shappy, Docket No. 26220-08; David M. Berwind and Jeanne M. Berwind, Docket No. 26221-08; and D. Michael Berwind, Jr., and Carol R. Berwind, Docket No. 26222-08. Served 12/04/23 2 [*2] 2. Under the control of Charles G. Berwind, Sr.’s son, Graham Berwind, Berwind Corporation redeemed all of the shares of the trusts for daughters Margaret and Emery and half the shares owned by the trust for son David. .............................. 9 3. In 1978, Berwind Corporation bought Colorcon, Inc. ................ 10 4. In 1983, BPSI was added to the corporate structure above Colorcon, Inc. ............................................................................... 11 5. In 1985, Berwind Corporation redeemed the remaining shares owned by the David Berwind Trust. ............................... 15 6. BPSI changed its articles of incorporation to authorize preference stock and preferential stock...................................... 17 7. The Graham Berwind Trust and the Graham Children Trusts consolidated their shares of Berwind Corporation and the common stock of BPSI; BPSI’s articles of incorporation were corrected to add terms regarding its preference and preferential stock. .............................................. 17 8. Under Pennsylvania law regarding short-form mergers, a parent corporation may merge with its 80%-owned subsidiary without a vote by the subsidiary’s other shareholders; however, these shareholders have the right to demand the fair market value of their sares. ........................ 26 9. In December 1999, a short-form merger was formalized between BPSI and its newly formed parent corporation, but this merger was challenged by the David Berwind Trust, which also asserted its right to receive the fair market value of its BPSI shares. ................................................ 40 OPINION ................................................................................................ 96 I. On December 16, 1999, there was a “sale or exchange” of the David Berwind Trust’s shares of BPSI common stock within the meaning of section 483. ............................................. 99 A. The plan of merger between BPSI Acquisition and BPSI did not violate BCL § 1922(a)(3); even if the plan of 3 [*3] merger did violate that provision, the merger was not void. ...................................................................................... 102 1. The plan of merger complied with BCL § 1922(a)(3). ... 102 2. Even if the plan of merger violated BCL § 1922(a)(3), the merger was not void. ................................................ 104 B. The merger of BPSI Acquisition and BPSI did not violate BPSI’s articles …
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