McDonald v. Commissioner
United States Tax Court
1. The petitioner, who owned all of the outstanding nonvoting preferred stock of E & M and substantially all of its outstanding common stock, entered into an agreement with Borden, under which E & M redeemed his preferred stock at par and thereafter Borden acquired all of E & M's outstanding stock in exchange for its own stock.
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1. The petitioner, who owned all of the outstanding nonvoting preferred stock of E & M and substantially all of its outstanding common stock, entered into an agreement with Borden, under which E & M redeemed his preferred stock at par and thereafter Borden acquired all of E & M's outstanding stock in exchange for its own stock. Held, the redemption of the petitioner's preferred stock was not essentially equivalent to a dividend. 2. The petitioner failed to show that he is entitled to any part of a deduction for legal fees disallowed by the respondent.
1Opinion of the Court
OPINION
We are presented with the vexing problem of deciding whether a redemption of corporate stock in the circumstances of this case should be treated as a sale or as the distribution of a dividend. The respondent considers the redemption of the petitioner’s preferred stock and his exchange of E & M common stock for the Borden stock to be separate transactions and therefore concedes that the exchange constituted a tax-free reorganization within the meaning of section 368(a) (1) (B). Therefore, we do not have before us any issue as to the propriety of treating the exchange with Borden as tax…
2Cases cited4 opinions
- Zenz v. QuinlivanCourt of Appeals for the Sixth Circuit · 1954
- Northup v. United StatesCourt of Appeals for the Second Circuit · 1957
- United States v. Gerald and Gladys CareyCourt of Appeals for the Eighth Circuit · 1961
- Blount v. CommissionerUnited States Tax Court · 1969
3Cited by24 opinions
- Merians v. CommissionerUnited States Tax Court · 1973
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- Niedermeyer v. CommissionerUnited States Tax Court · 1974
- Edmondson v. Allen-Russell Ford, Inc.Court of Appeals for the Fifth Circuit · 1978
- Roebling v. CommissionerUnited States Tax Court · 1981
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