Davis v. Commissioner of Internal Revenue

MOORMAN, Circuit Judge.

Hugo Scherer was the owner of the Hugo Scherer Land Company, the Detroit Forging Company and the St. ClairAthol Rubber Company. Petitioners were employees of the Scherer Company. In November of 1923 Scherer died, leaving a will in which he devised all of his property to his wife and two daughters. About four months later his wife and daughters made a contract with petitioners by which the petitioners agreed to organize a new corporation, Davis, Kraus & Miller, Inc., with an authorized capital stock, half 6 per cent, cumulative preferred and half common, equal in capital…