Hutton v. Commissioner
United States Tax Court
Petitioner transferred all the assets of a sole proprietorship to a controlled corporation pursuant to sec. 351, I.R.C. 1954. As of the date of transfer, the proprietorship had a balance in its reserves for bad debts. Held, petitioners were not allowed a deduction for an addition to the reserves immediately before the transfer because sec. 1.166-4, Income Tax Regs., specifies that additions are to be made only at the end of the taxable year.
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Petitioner transferred all the assets of a sole proprietorship to a controlled corporation pursuant to sec. 351, I.R.C. 1954. As of the date of transfer, the proprietorship had a balance in its reserves for bad debts. Held, petitioners were not allowed a deduction for an addition to the reserves immediately before the transfer because sec. 1.166-4, Income Tax Regs., specifies that additions are to be made only at the end of the taxable year. Held, further, petitioners were required to report the remaining unabsorbed balance as taxable income in the year of the transfer since, by virtue of the…
1Opinion of the Court
OPINION
Tietjens, Judge:
The Commissioner determined a deficiency in petitioners’ Federal income tax for the taxable year 1964 in the amount of $17,968.80. The only issue presented is whether petitioners were required, upon the transfer of all the assets and liabilities of a sole proprietorship to a controlled corporation under section 351,1.R.C. 1954,1 to include as taxable income for that year, $38,904.12, which represents the balance of two reserves for bad debts at the date of the transfer.
All of the facts have been stipulated and the case has been submitted under Rule 30. The stipulations…
2Cases cited6 opinions
- Geyer, Cornell & Newell, Inc. v. CommissionerUnited States Tax Court · 1946
- Bird Management, Inc. v. CommissionerUnited States Tax Court · 1967
- J. E. Hawes Corp. v. CommissionerUnited States Tax Court · 1965
- Estate of Heinz Schmidt, Deceased, and Charlotte Schmidt v. Commissioner of Internal RevenueCourt of Appeals for the Ninth Circuit · 1966
- Schmidt v. CommissionerUnited States Tax Court · 1964
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3Cited by5 opinions
- Foster v. Comm'rUnited States Tax Court · 1983
- Great Lakes Overseas, Inc. v. Wah Kwong Shipping Group, Ltd.Court of Appeals for the Seventh Circuit · 1993
- Robert P. Hutton and Marguerite C. Hutton v. Commissioner of Internal RevenueCourt of Appeals for the Sixth Circuit · 1971
- Bohannon v. CommissionerUnited States Tax Court · 1997
- Hutton v. CommissionerUnited States Tax Court · 1969