Bloch v. United States
United States District Court for the Southern District of Texas
261 F. Supp. 597 (1966)
- Written by Heather Ryfa, JD
Facts
William Bloch (plaintiff) and B. F. Bryan both owned 45 percent of Southern Elevator and Storage Company, Inc. (company), and Lee Harris owned 10 percent. The company wished to give Harris and William Parrish, the plant manager, an option to purchase stock. The company redeemed 15 percent of the stock from Bloch and Bryan; each received a no-interest promissory note for $35,700, payable within three years. A purchase price lower than the redemption price was offered to Harris and Parrish; Parrish bought two-thirds of the shares, and Harris bought the remaining one-third. Bryan, Bloch, Harris, and Parrish were also partners in a partnership related to the company’s business, formed three years prior to the redemption. Bloch reported the payments from the note as capital gains. The commissioner of the Internal Revenue Service (defendant) assessed a deficiency based on classifying the payments as dividends taxable as ordinary income. Bloch appealed the assessment to the United States District Court for the Southern District of Texas.
Rule of Law
Issue
Holding and Reasoning (Graven, J.)
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