Focht v. Commissioner
United States Tax Court
Petitioner transferred all of the assets and liabilities of his sole proprietorship to a corporation in exchange for all the stock of such corporation. The sum of the liabilities assumed by the corporation exceeded the total adjusted basis of the proprietorship's assets transferred. Held, an obligation to the extent that its payment would have been deductible if made by petitioner shall not, for purposes of secs. 357 and 358, be treated as a liability.
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Petitioner transferred all of the assets and liabilities of his sole proprietorship to a corporation in exchange for all the stock of such corporation. The sum of the liabilities assumed by the corporation exceeded the total adjusted basis of the proprietorship's assets transferred. Held, an obligation to the extent that its payment would have been deductible if made by petitioner shall not, for purposes of secs. 357 and 358, be treated as a liability. Held, further, the amount of unreported rental income and various unsubstantiated deductions determined.
1Dissent · TannenwaldTannenwald, J.
The fact that two Circuit Courts of Appeals and now this Court have had to evolve three different theories, producing differing consequences, in order to qualify the word "liabilities” in section 357(c) provides the clearest basis for concluding that we should accord that word its ordinary meaning. Even the broad-brush approach which the Supreme Court adopted in Nash v. United States, 398 U.S. 1 (1970), cannot be applied here. At least in that case, the Court was able to accord section 351 a pervasive effect in a situation where the transfer of the item involved was not specifically covered…
Also in this document: Dissent · Hall.
2Cases cited8 opinions
- Nash v. United StatesSupreme Court of the United States · 1970
- Braunstein v. CommissionerSupreme Court of the United States · 1963
- Holdcroft Transp. Co. v. Commissioner of Internal RevenueCourt of Appeals for the Eighth Circuit · 1946
- Hempt Bros., Inc. v. United StatesCourt of Appeals for the Third Circuit · 1974
- Brewster v. CommissionerUnited States Tax Court · 1976
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