Commissioner of Internal Revenue v. Estate of Bedford
United States Supreme Court
325 U.S. 283 (1945)
- Written by Heather Ryfa, JD
Facts
The estate of Edward Bedford (estate) (plaintiff) owned 3,000 shares of preferred stock of Abercrombie & Fitch Company. Pursuant to a recapitalization plan that was devised to distribute earnings in compliance with state law, the estate exchanged the preferred stock for cumulative preferred stock, common stock, and $45,240 cash. The estate reported the cash as capital gains on the sale of the preferred stock. The commissioner of the Internal Revenue Service (defendant) assessed additional tax, claiming that the cash was taxable as a dividend. The estate appealed the assessment to the United States Tax Court, which ruled in favor of the commissioner. The United States Court of Appeals for the Second Circuit reversed the decision on appeal and ruled in favor of the estate. The commissioner then appealed to the United States Supreme Court.
Rule of Law
Issue
Holding and Reasoning (Frankfurter, J.)
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