Gelfand v. United States

In this suit, plaintiffs seek refund of Federal income taxes for the years 1950-53. The controversy focuses upon section 117 (m) of the Internal Revenue Code of 19391 — more familiarly recognized as the “collapsible corporation” provisions.2 This section, first introduced into the Internal Revenue Code in 1950, was designed to prevent use of the corporate form as a means of escaping ordinary income treatment through the guise of accelerated capital gains. The issue here is whether the Commissioner of Internal Revenue was correct in claiming that section 117 (m) required plaintiffs to treat as…