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Bradford v. Commissioner

233 F.2d 935 (1956)

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Bradford v. Commissioner

United States Court of Appeals for the Sixth Circuit

233 F.2d 935 (1956)

Facts

Mr. Bradford worked at a brokerage firm that owned a seat on the New York Stock Exchange. In 1938 the New York Stock Exchange required all partners of member firms to disclose their indebtedness. Mr. Bradford owed a bank approximately $305,000. To lower his debt load on paper and protect his reputation, Mr. Bradford transferred $205,000 of his debt to his wife. When Mrs. Bradford (plaintiff) submitted the contract to the bank, she did not receive any consideration in return. In 1940, at the request of the bank, Mrs. Bradford replaced her $205,000 debt with a $105,000 secured loan and a $100,000 unsecured loan. In 1946 the bank told Mrs. Braford it would sell her the $100,000 unsecured loan for $50,000. Mrs. Bradford’s brother-in-law purchased the debt using money provided by Mr. Bradford. The Commissioner of Internal Revenue (the Commissioner) (defendant) held that the $50,000 written off of the unsecured loan was taxable income. Mrs. Bradford appealed to the United States Tax Court, arguing that because the loan was originally her husband’s and she received nothing in consideration for having it transferred to her, she did not realize any income when half of it was discharged. The tax court upheld the Commissioner’s decision. Mrs. Bradford appealed.

Rule of Law

Issue

Holding and Reasoning (Stewart, J.)

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