W. A. Drake, Inc. v. Commissioner
United States Tax Court
Petitioner owned several farms which were heavily encumbered. It desired to reduce the amount of interest payable. It entered into contracts to sell two farms to one of its stockholders, who owned, directly or indirectly, more than 50 percent of its stock. The principal consideration paid for the farms was petitioner's stock, which it thereafter carried as treasury stock.
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Petitioner owned several farms which were heavily encumbered. It desired to reduce the amount of interest payable. It entered into contracts to sell two farms to one of its stockholders, who owned, directly or indirectly, more than 50 percent of its stock. The principal consideration paid for the farms was petitioner's stock, which it thereafter carried as treasury stock. After the sale, which was made at a loss, the stockholder no longer owned 50 percent of petitioner's stock. Held, that the loss may not be allowed because of the provisions of section 24, I. R. C.
1Opinion of the Court
OPINION.
Mellott, Judge:
The Commissioner determined a deficiency in income tax of $1,492.82 and in declared value excess profits tax of $495.44 for the fiscal year ended June 30. 1941. The sole question is whether a loss, sustained by petitioner upon the sale of a farm to one of its stockholders, is deductible from gross income or whether section 24 (b) (1) (B), I. R. C., prevents the allowance of the loss as a deduction.
The facts are found to be as stipulated. Summarizing them, petitioner, a Colorado corporation, was organized in 1924 to handle the assets left by W. A. Drake, who had died…
2Cases cited8 opinions
- Higgins v. SmithSupreme Court of the United States · 1940
- Lucas v. North Texas Lumber Co.Supreme Court of the United States · 1930
- Stelson v. HaiglerSupreme Court of Colorado · 1917
- Morath v. PerkinsSupreme Court of Colorado · 1929
- Cullen v. Park Club Land Co.Supreme Court of Colorado · 1919
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3Cited by36 opinions
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