James H. Merritt, Sr., and Amanda Merritt v. Commissioner of Internal Revenue

GOLDBERG, Circuit Judge:

This case presents the question of whether a loss sustained by an individual taxpayer after the involuntary sale of stock owned in a family corporation is deductible when the purchaser was the taxpayer’s wife. Both the appellants and the government agree that the loss was validly deducted unless Section 267 of the Internal Revenue Code of 1954— transactions between related taxpayers— is applicable. 1 The Tax Court held that Section 267 is not restricted to voluntary-sales as advocated by the appellants here, but also encompasses involuntary sales between members of a…