Commissioner of Internal Revenue v. E. J. Zongker and Charleen Zongker

This is a petition for review of a decision of the Tax Court holding that the corporation in which taxpayers held fifty per cent of the stock was not a “collapsible corporation” within the meaning of Section 117 (m) of the Internal Revenue Code of 1939, and that the gain from the sale of the stock was, therefore, taxable as capital gain rather than ordinary income. See: 39 T.C. 1046. The crux of this controversy is Section 117 (m) (2) (A), which defines a “collapsible corporation” as “a corporation formed or availed of principally for the manufacture, construction, or production of property…