General Utilities Doctrine

General Utilities doctrine was repealed by
the Tax Reform Act of 1986

Now corporations recognize gain on almost all distributions of appreciated property to shareholders:

A corporation distributing appreciated property to a shareholder is deemed to have sold that property to the shareholder at the property's fair market value, recognizing gain, and then to have distributed to the shareholder the cash deemed received in that sale (double taxation)
If the shareholder is another corporation which is a member of the same consolidated return group as the distributing corporation, the gain on the deemed sale may not be taxed immediately but give rise to deferred intercompany gain which can be triggered when, among other circumstances, either the distributing or distributee corporation leaves the consolidated return group (i.e., is sold)

Without the General Utilities doctrine, there are few ways to distribute appreciated property to shareholders without incurring an entity level tax:

General Utilities Co v Helvering 296 U S 200 (1935)

Before the Tax Reform Act of 1986 the general rule was that a corporation recognized no gain or loss on the distribution of appreciated property to its shareholders
Exceptions and limitations had crept in over time, e.g., recognition of corporate gain on appreciated property used to redeem stock

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