Braddock Land Co. v. Commissioner
United States Tax Court
After adopting a plan of complete liquidation under sec. 337, I.R.C. 1954, two of the petitioners, both shareholder-employees, purportedly "forgave" accrued salaries, bonuses, and interest owed to them by their corporation. Held, the "forgiveness" is disregarded as it lacks economic reality and is a sham. Held, further: Amounts paid to petitioners during the process of liquidation constitute ordinary income to the extent of the salaries, bonuses, and interest due them.
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After adopting a plan of complete liquidation under sec. 337, I.R.C. 1954, two of the petitioners, both shareholder-employees, purportedly "forgave" accrued salaries, bonuses, and interest owed to them by their corporation. Held, the "forgiveness" is disregarded as it lacks economic reality and is a sham. Held, further: Amounts paid to petitioners during the process of liquidation constitute ordinary income to the extent of the salaries, bonuses, and interest due them. Only the excess received is a distribution in complete liquidation under sec. 331(a).
1Opinion of the Court
Braddock Land Company, Inc., et al., 1 Petitioners v. Commissioner of Internal Revenue, Respondent
Braddock Land Co. v. Commissioner
Docket Nos. 3812-77, 3813-77, 3814-77
United States Tax Court
75 T.C. 324; 1980 U.S. Tax Ct. LEXIS 21;
December 3, 1980, Filed
Decision will be entered for the petitioner in docket No. 3812-77.
Decisions will be entered for the respondent in docket Nos. 3813-77 and 3814-77.
After adopting a plan of complete liquidation under sec. 337, I.R.C. 1954, two of the petitioners, both shareholder-employees, purportedly "forgave" accrued salaries, bonuses, and interest owed to…
2Cases cited25 opinions
- Gregory v. HelveringSupreme Court of the United States · 1935
- Higgins v. SmithSupreme Court of the United States · 1940
- Knetsch v. United StatesSupreme Court of the United States · 1960
- United States v. IshamSupreme Court of the United States · 1873
- Superior Oil Co. v. Mississippi Ex Rel. KnoxSupreme Court of the United States · 1930
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