Commissioner v. Wilson
United States Court of Appeals for the Ninth Circuit
353 F.2d 184 (1965)
- Written by Eric Miller, JD
Facts
William Wilson, operator of a furniture business, died in 1950. Wilson’s widow and sons (defendants) continued the businesses as a partnership. In 1955 the sons formed Wilson’s Furniture, Inc., transferring the partnership’s assets to the corporation. In 1958 Wilson’s Furniture formed a spin-off corporation, Wil-Plan, to which it transferred its conditional sales contracts involving deferred payments. All stock in Wil-Plan was distributed to the sons, with a fair market value of $69,020.07 each, on which the sons paid no taxes. The Commissioner of Internal Revenue (the commissioner) (plaintiff) assessed deficiencies. The sons filed for a redetermination in the United States Tax Court, asserting that the corporate division was motivated by valid business purposes and thus merited treatment as a nontaxable reorganization. The tax court disagreed that the business purposes existed at the time of the transaction. However, the court also found that the spin-off was not motivated by the purpose of tax avoidance. The court ruled in favor of the sons. The commissioner appealed. The United States Court of Appeals for the Ninth Circuit granted certiorari.
Rule of Law
Issue
Holding and Reasoning (Madden, J.)
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