Leroy Frantz, Jr. And Sheila Frantz v. Commissioner of Internal Revenue

MANSFIELD, Circuit Judge:

Leroy Frantz, Jr. and his wife Sheila Frantz (hereinafter referred to in the singular as the “taxpayer” since Mr. Frantz was the principal actor in the relevant transactions) appeal from a decision of the United States Tax Court, Sterrett, C.J., entered on January 29, 1985 (reported at 83 T.C. 162), holding that their non-pro-rata surrender of their preferred stock in a closely-held corporation controlled by them, Andree Biallot, Ltd. (ABL), and their cancellation of indebtedness for advances made to ABL for the purpose of enabling it to improve its financial…