Sherman v. Commissioner

U.S. Tax Court

Sherman v. Commissioner

34 T.C. 303

CourtUnited States Tax Court

DecidedMay 24, 1960

DocketDocket No. 74212

StatusPublished

This text of 34 T.C. 303 (Sherman v. Commissioner) is published on Counsel Stack Legal Research, covering United States Tax Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

Sherman v. Commissioner, 34 T.C. 303 (tax 1960).

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Opinions

OPINION.

Raum, Judge:

1. As in FabreeJca Products Co., 34 T.C. 290, decided this day, the deduction for so-called amortization of bond premium must be disallowed on the authority of Maysteel Products, Inc., 33 T.C. 1021. This case presents merely a variation of the device which Glunts masterminded, and which was used in the Fabreeka case. When viewed as a whole the transaction seems utterly unreal. For example, why should Sherman have sold $60,000-face-value Illinois bonds to Keizer on May 24, 1955, at a price of 114 and on the very same day have purchased $60,000-face-value Illinois bonds of the identical issue from Keizer at 115? He knew very little about what he was buying and selling, except that he expected, upon Glunts’ advice, to acquire a tax deduction. We need not go into further detail. The record speaks for itself. And it is a matter of no consequence that Sherman became panicky and was willing to sustain a loss on the second block of bonds by selling them prior to the expiration of the 6 months’ holding period applicable thereto. That the plan failed in part, for whatever reason, to produce the anticipated results does not give Sherman a preferred status in relation to this issue.

2. Petitioner, however, is entitled to deduct the interest which he actually paid on the loans that were made in order to carry out the principal, although taxwise abortive, transactions. Fabreeka Products Co., 34 T.C. 290, decided this day.

Reviewed by the Court.

Decision will be entered under Bule 50.

Dkennen, /., concurs in the result.

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OPINION.

Raum, Judge:

1. As in FabreeJca Products Co., 34 T.C. 290, decided this day, the deduction for so-called amortization of bond premium must be disallowed on the authority of Maysteel Products, Inc., 33 T.C. 1021. This case presents merely a variation of the device which Glunts masterminded, and which was used in the Fabreeka case. When viewed as a whole the transaction seems utterly unreal. For example, why should Sherman have sold $60,000-face-value Illinois bonds to Keizer on May 24, 1955, at a price of 114 and on the very same day have purchased $60,000-face-value Illinois bonds of the identical issue from Keizer at 115? He knew very little about what he was buying and selling, except that he expected, upon Glunts’ advice, to acquire a tax deduction. We need not go into further detail. The record speaks for itself. And it is a matter of no consequence that Sherman became panicky and was willing to sustain a loss on the second block of bonds by selling them prior to the expiration of the 6 months’ holding period applicable thereto. That the plan failed in part, for whatever reason, to produce the anticipated results does not give Sherman a preferred status in relation to this issue.

2. Petitioner, however, is entitled to deduct the interest which he actually paid on the loans that were made in order to carry out the principal, although taxwise abortive, transactions. Fabreeka Products Co., 34 T.C. 290, decided this day.

Reviewed by the Court.

Decision will be entered under Bule 50.

Dkennen, /., concurs in the result.

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34 T.C. 303, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sherman-v-commissioner-tax-1960.

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