Braunstein v. Commissioner

This ease involves the applicability of the “collapsible corporation” provisions of the federal income tax laws which, during the period relevant here, were set forth in §117 (m) of the Internal Revenue Code of 1939. These provisions require that under certain circumstances, gain from the sale of stock which would otherwise be considered as long-term capital gain, and accordingly taxed at a maximum rate of 25%, must be reported as ordinary income.

The three taxpayers who are petitioners here became .associated in 1938 and have since participated in a number of construction projects, usually…