Nahey v. Commissioner
United States Tax Court
W, a corporation, sued X for breach of contract and misrepresentation for failing to complete the installation of a computer system and sought damages for lost profits. X counterclaimed for withheld payments by W. In 1986, P, through his two S corporations, acquired all of the assets and assumed all of the liabilities of W, including W's lawsuit against X and X's counterclaim against W. W was thereafter liquidated.
Read the full summary
W, a corporation, sued X for breach of contract and misrepresentation for failing to complete the installation of a computer system and sought damages for lost profits. X counterclaimed for withheld payments by W. In 1986, P, through his two S corporations, acquired all of the assets and assumed all of the liabilities of W, including W's lawsuit against X and X's counterclaim against W. W was thereafter liquidated. No part of the purchase price for W's assets was allocated to the claim against X. In 1992, the lawsuit with X was settled for total consideration of $ 6,345,183. The settlement…
1Opinion of the Court
Jacobs, Judge:
Respondent determined a $185,833 deficiency in petitioners’ 1992 Federal income taxes.
The deficiency herein arises from the parties’ dispute over the characterization of settlement proceeds from a lawsuit that was brought by a corporation whose assets, including the lawsuit, were purchased by petitioners’ two S corporations. The sole issue we must decide is whether the settlement proceeds received by the S corporations (and passed through to petitioners) constitute ordinary income, as respondent contends, or long-term capital gain, as petitioners contend.1
All section references…
2Cases cited34 opinions
- United States v. GilmoreSupreme Court of the United States · 1963
- Woodward v. CommissionerSupreme Court of the United States · 1970
- Arrowsmith v. CommissionerSupreme Court of the United States · 1952
- United States v. Hilton Hotels Corp.Supreme Court of the United States · 1970
- Fairbanks v. United StatesSupreme Court of the United States · 1939
29 more not listed; retrieve them via the Exa API.
3Cited by21 opinions
- Brian L. Nahey and Carol J. Nahey v. Commissioner of Internal RevenueCourt of Appeals for the Seventh Circuit · 2000
- Gladden v. Comm'rUnited States Tax Court · 1999
- Ill. Tool Works v. Comm'rUnited States Tax Court · 2001
- Cohan v. Comm'rUnited States Tax Court · 2012
- Patrick v. Comm'rUnited States Tax Court · 2014
16 more not listed; retrieve them via the Exa API.