Henry C. Tilford, Jr. And Barbara N. Tilford v. Commissioner of Internal Revenue

GEORGE CLIFTON EDWARDS, Jr., Chief Circuit Judge.

This is an appeal by the Commissioner of the Internal Revenue Service from a Tax Court decision that held an IRS regulation invalid and by so doing, permitted the taxpayer to take substantial capital loss deductions.

The facts indicate that taxpayer Henry Tilford was the principal officer and share*829holder of a company called Watco. He had invested $350,000 in the company stock, thereby owning all of Watco’s 170,000 issued shares, and had advanced an additional $79,500 in loans by the end of 1970. Seeking to motivate a number of employees, he…