Calloway v. Commissioner
United States Tax Court
In August 2001 P entered into an agreement with Derivium whereby P transferred 990 shares of IBM common stock to Derivium in exchange for $93,586.23. The terms of the agreement characterized the transaction as a loan of 90 percent of the value of the IBM stock pledged as collateral. The purported loan was nonrecourse and prohibited P from making any interest or principal payments during the 3-year term of the purported loan.
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In August 2001 P entered into an agreement with Derivium whereby P transferred 990 shares of IBM common stock to Derivium in exchange for $93,586.23. The terms of the agreement characterized the transaction as a loan of 90 percent of the value of the IBM stock pledged as collateral. The purported loan was nonrecourse and prohibited P from making any interest or principal payments during the 3-year term of the purported loan. The terms of the agreement allowed Derivium to sell the stock, which it did immediately upon receipt. At maturity P had the option of either paying the balance due and…
1ConcurrenceHolmes, J.
Calloway and Derivium agreed to what Calloway claims was a nonrecourse loan secured by his stock. In exchange for money, Calloway transferred control of the stock to Derivium. Derivium sold the stock on the open market. The tax rules would seem to be easy to apply. Section 1.1001-2(a)(4)(i), Income Tax Regs., provides that “the sale * * * of property that secures a non-recourse liability discharges the transferor from the liability.” Commissioner v. Tufts, 461 U.S. 300, 308-09 (1983), and Crane v. Commissioner, 331 U.S. 1, 12-13 (1947), teach that the amount realized includes any nonrecourse…
2Cases cited34 opinions
- Crane v. CommissionerSupreme Court of the United States · 1947
- Burnet v. Sanford & Brooks Co.Supreme Court of the United States · 1931
- Grodt & McKay Realty, Inc. v. CommissionerUnited States Tax Court · 1981
- Commissioner v. TuftsSupreme Court of the United States · 1983
- Richardson v. ShawSupreme Court of the United States · 1908
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