David Metzger Trust v. Commissioner
United States Court of Appeals for the Fifth Circuit
76 T.C. 42, 80-84 (1981), 693 F.2d 459 (1982)
- Written by Heather Ryfa, JD
Facts
David Metzger Trust (trust) (plaintiff) was a shareholder in Metzger Dairies, Inc. (corporation) (plaintiff), both of which were created by the late David Metzger. The beneficiaries of the trust were David’s wife and his three children—Jacob, Catherine, and Cecelia. Jacob ran the corporation, and his sisters were directors. Due to family disagreements, the siblings decided to end their joint ownership of the corporation. The agreed-upon plan was for the corporation to redeem the shares of Catherine, Cecelia, and the trust. Cecelia received a promissory note from the corporation to pay for her shares in three annual installments along with accrued interest. Cecelia reported interest income in those three years; the corporation deducted the interest liability. The commissioner of the Internal Revenue Service (defendant) assessed deficiencies against the corporation and the trust. The trust and the corporation appealed to the United States Tax Court, which ruled in favor of the commissioner. The trust and the corporation then appealed to the United States Court of Appeals for the Fifth Circuit.
Rule of Law
Issue
Holding and Reasoning (Higginbotham, J.)
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