Eugene W. And Marie P. Fireoved, in Nos. 71-1565 v. United States of America, in Nos. 71-1566, 71-1567

OPINION OF THE COURT

ADAMS, Circuit Judge.

This appeal calls into question the application of section 306 of the Internal Revenue Code of 1954 1 and the “first in-first out rule” 2 to a redemption of preferred stock in a corporation by plaintiff, 3 one of its principal shareholders. In particular we are asked to decide whether the transaction here had “as one of its principal purposes the avoidance of Federal income tax,” 4 whether a prior sale of a portion of the underlying common stock immunized a like proportion of the section 306 stock from treatment as a noncapital asset 5 and whether…