Johnson v. Commissioner

Board of Tax Appeals

Johnson v. Commissioner

37 B.T.A. 155, 1938 BTA LEXIS 1081

CourtUnited States Board of Tax Appeals

DecidedJanuary 21, 1938

DocketDocket No. 82263.

StatusPublished

Cited by4 cases

This text of 37 B.T.A. 155 (Johnson v. Commissioner) is published on Counsel Stack Legal Research, covering United States Board of Tax Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

Johnson v. Commissioner, 37 B.T.A. 155, 1938 BTA LEXIS 1081 (bta 1938).

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[157]*157OPINION.

Murdock:

The law is well settled that transactions such as this must be closely scrutinized. But here careful scrutiny fails to reveal any justification for denying the loss. The Investment Co. was a separate taxpayer from the petitioner, regardless of the extent to which he controlled it. It actually bought the stock, paid for it, became the owner, and continued to be the owner. The price was right. There was no subsequent reacquisition by the petitioner or option or agreement to acquire. There is nothing to indicate that the wife did not fully benefit from her interest in the corporation acquired with funds given her by her husband. The natural inference is the other way. The petitioner took no undue advantage of his power to control the purchaser. The fact that he organized or used the corporation to serve his purpose of minimizing his taxes becomes immaterial. The petitioner,' as a taxpayer, made an actual bona fide sale to another taxpayer and sustained a loss which he is entitled to deduct. Seymour H. Knox, 33 B. T. A. 972; Marjory Taylor Hardwick, 33 B. T. A. 249; Edwards Securities Corporation, 30 B. T. A. 918; affd., 83 Fed. (2d) 1007; James E. Wells, 29 B. T. A. 222; David, Stewart, 17 B, T. A, 604. See also the following cases, which hold generally that deductions are allowed on sales to or by [158]*158closely held corporations where no exceptional circumstances justify disregarding the separateness for tax purposes of the stockholders and their corporations, where the price was fair, and where no plan for reacquisition by the seller appeared, regardless of the fact that the sale may have been for the purpose of minimizing taxes. Rands, Inc., 34 B. T. A. 1094; Ralph Hochstetter, 34 B. T. A. 791; William, H. Albers, 33 B. T. A. 373; A. S. Eldridge, 30 B. T A. 1322; affd., 79 Fed. (2d) 629; Jones v. Helvering, 71 Fed. (2d) 214; Commissioner v. McCreery, 83 Fed. (2d) 817. Nor is the gift to the wife fatal to the contention of the petitioner. Thomas W. Behan, 32 B. T. A. 1088; affd., 90 Fed. (2d) 609.

The new corporation continued to exist. It had at least one other transaction. The wife had a substantial interest in it different from that of her husband. The steps taken and the reality of the corporation can not be disregarded. Cf. Gregory v. Hel/oering, 293 U. S. 465.

Reviewed by the Board.

Decision will te entered wader Rule 50.

TtjeneR dissents.

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[157]*157OPINION.

Murdock:

The law is well settled that transactions such as this must be closely scrutinized. But here careful scrutiny fails to reveal any justification for denying the loss. The Investment Co. was a separate taxpayer from the petitioner, regardless of the extent to which he controlled it. It actually bought the stock, paid for it, became the owner, and continued to be the owner. The price was right. There was no subsequent reacquisition by the petitioner or option or agreement to acquire. There is nothing to indicate that the wife did not fully benefit from her interest in the corporation acquired with funds given her by her husband. The natural inference is the other way. The petitioner took no undue advantage of his power to control the purchaser. The fact that he organized or used the corporation to serve his purpose of minimizing his taxes becomes immaterial. The petitioner,' as a taxpayer, made an actual bona fide sale to another taxpayer and sustained a loss which he is entitled to deduct. Seymour H. Knox, 33 B. T. A. 972; Marjory Taylor Hardwick, 33 B. T. A. 249; Edwards Securities Corporation, 30 B. T. A. 918; affd., 83 Fed. (2d) 1007; James E. Wells, 29 B. T. A. 222; David, Stewart, 17 B, T. A, 604. See also the following cases, which hold generally that deductions are allowed on sales to or by [158]*158closely held corporations where no exceptional circumstances justify disregarding the separateness for tax purposes of the stockholders and their corporations, where the price was fair, and where no plan for reacquisition by the seller appeared, regardless of the fact that the sale may have been for the purpose of minimizing taxes. Rands, Inc., 34 B. T. A. 1094; Ralph Hochstetter, 34 B. T. A. 791; William, H. Albers, 33 B. T. A. 373; A. S. Eldridge, 30 B. T A. 1322; affd., 79 Fed. (2d) 629; Jones v. Helvering, 71 Fed. (2d) 214; Commissioner v. McCreery, 83 Fed. (2d) 817. Nor is the gift to the wife fatal to the contention of the petitioner. Thomas W. Behan, 32 B. T. A. 1088; affd., 90 Fed. (2d) 609.

The new corporation continued to exist. It had at least one other transaction. The wife had a substantial interest in it different from that of her husband. The steps taken and the reality of the corporation can not be disregarded. Cf. Gregory v. Hel/oering, 293 U. S. 465.

Reviewed by the Board.

Decision will te entered wader Rule 50.

TtjeneR dissents.

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Bluebook (online)

37 B.T.A. 155, 1938 BTA LEXIS 1081, Counsel Stack Legal Research, https://law.counselstack.com/opinion/johnson-v-commissioner-bta-1938.

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