Bazley v. Commissioner

331 U.S. 737, 67 S. Ct. 1489 (1947)

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Bazley v. Commissioner

United States Supreme Court
331 U.S. 737, 67 S. Ct. 1489 (1947)

  • Written by Robert Cane, JD

Facts

Bazley (plaintiff) exchanged stock of a family corporation for stock and bonds from the same corporation. Bazley claimed the transaction was a recapitalization and, as a result, a tax-free reorganization under Internal Revenue Code (I.R.C.) § 368. The commissioner of the Internal Revenue Service (IRS) (defendant) treated the bonds as taxable income because they were effectively the same as a cash distribution. The tax court affirmed the finding of the commissioner and concluded that the recapitalization had no legitimate corporate purpose other than tax avoidance. The appellate court affirmed the finding of the tax court. Bazley appealed to the United States Supreme Court.

Rule of Law

Issue

Holding and Reasoning (Frankfurter, J.)

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