Estate of Miller v. Commissioner
United States Tax Court
Three equal partners determined to operate their business in corporate form. Pursuant to a prearranged plan they paid a nominal amount for all the stock, which was no par and of a nominal declared value, of a newly organized corporation, and thereafter transferred to it substantially all the operating assets of the partnership plus $ 50,000 in cash. The corporation issued notes purportedly in exchange for such assets and cash.
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Three equal partners determined to operate their business in corporate form. Pursuant to a prearranged plan they paid a nominal amount for all the stock, which was no par and of a nominal declared value, of a newly organized corporation, and thereafter transferred to it substantially all the operating assets of the partnership plus $ 50,000 in cash. The corporation issued notes purportedly in exchange for such assets and cash. Held, the sum representing the declared value of the stock was grossly inadequate to operate the business and the low stated value was a fiction; the risk capital…
1Opinion of the Court
OPINION.
Raum, Judge:
While two issues have been separately stated, they are actually different aspects of the same question. Both depend upon the reality of the purported indebtedness evidenced by the notes.
It should be noted at the outset that this is not a case involving “hybrid securities,” a term generally used to describe corporate instruments bearing indicia both of evidence of indebtedness and of capital investment, where the problem is one of determining whether the terms of the instrument as read create an effect more like that of an investment or more like that of a debt. See, e. g.,…
2Cases cited26 opinions
- Doyle v. Mitchell Brothers Co.Supreme Court of the United States · 1918
- John Kelley Co. v. CommissionerSupreme Court of the United States · 1946
- Gooding Amusement Co. v. CommissionerUnited States Tax Court · 1954
- Schnitzer v. CommissionerUnited States Tax Court · 1949
- Dobkin v. CommissionerUnited States Tax Court · 1950
21 more not listed; retrieve them via the Exa API.
3Cited by22 opinions
- Colony, Inc. v. CommissionerUnited States Tax Court · 1956
- Georgia-Pacific Corp. v. CommissionerUnited States Tax Court · 1975
- Burr Oaks Corp. v. CommissionerUnited States Tax Court · 1965
- Brown v. CommissionerUnited States Tax Court · 1956
- Estate of Miller v. CommissionerCourt of Appeals for the Ninth Circuit · 1956
17 more not listed; retrieve them via the Exa API.