Court rules in favor of IRS in demutualization case

The US District Court for the Central District of California, recently ruled in Timothy D. Reuben v. United States, ; No. 2:11-cv-09448, that the open transaction doctrine did not apply, concluding that the taxpayer’s insurance premium payments were not for membership rights and that the taxpayer had a zero basis in the shares it received as part of a demutualization.