Old Colony Trust Co. v. Commissioner

The decedent and another individual, being the sole stockholders of X Co., sold to X Co. shares of stock in Y Co. Later, after several transactions in the Y Co. stock by which X Co. bought from and sold to outsiders, the X Co. sold to its stockholders (the decedent and his associate) some of the Y Co. stock it had bought from them and additional shares that it had bought from others. The decedent in this manner purchased 37,500 shares of Y Co. stock from X Co. which he sold shortly thereafter. Held, the sale by the decedent was not a sale of capital assets, since he had held the stock sold…