William L. Mitchell and Marian S. Mitchell v. Commissioner of Internal Revenue

PHILLIPS, Chief Judge.

The question presented on this appeal is whether a payment made by a taxpayer to his employer for an alleged “insider” profit in a stock transaction, which was in the nature of a business expense but which had its genesis in a transaction in which the taxpayer realized a long term capital gain, should be treated as a long term capital loss. Stated differently, the issue is whether the tax benefits doctrine of Arrowsmith v. Commissioner of Internal Revenue, 344 U.S. 6, 73 S.Ct. 71, 97 L.Ed. 6, controls under the facts of the present case.

In an opinion published at 52 T.C.…