Cummings v. Commissioner

506 F.2d 449 (1974), cert. denied 421 U.S. 913 (1975)

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Cummings v. Commissioner

United States Court of Appeals for the Second Circuit
506 F.2d 449 (1974), cert. denied 421 U.S. 913 (1975)

SC

Facts

In April 1961, Cummings (plaintiff), a director of Metro-Goldwyn-Mayer, Inc. (MGM), sold 3400 shares of MGM stock for a profit. Cummings reported the profit as long-term capital gains on his income tax return. In September and October 1961, Cummings bought back 3000 shares of MGM stock. The difference between the April sale price and the buyback price was approximately $54,000. Under section 16(b) of the Securities and Exchange Act of 1934, Cummings was required to remit this difference to MGM. Cummings did so, and then reported the repayment as an ordinary-income deduction on his tax return. The Internal Revenue Service (IRS) (defendant) assessed a deficiency, ruling that the repayment should be classified as a long-term capital loss. The United States Tax Court reversed. The IRS appealed.

Rule of Law

Issue

Holding and Reasoning (Kaufman, C.J.)

Concurrence (Smith, J.)

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Federal Income Tax

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