Commissioner of Internal Revenue v. Neustadt's Trust

SWAN, Circuit Judge.

In 1937 the taxpayers, trustees of a testamentary trust for the benefit of Agnes Neustadt, exchanged their holdings of 20 year 6 per cent, debentures of Paramount Pictures, Inc., for a like face amount of 10 year 314 per cent, convertible debentures of the same company, pursuant to a formal offer of exchange addressed by the company to all holders of the 20 year debenture bonds. The commissioner contended that this resulted in a taxable gain. The taxpayers claimed, and the Tax Court held, that no taxable gain was recognizable because the transaction constituted -an…