Diamond v. Commissioner
United States Tax Court
56 T.C. 530 (1971)
- Written by Matthew Celestin, JD
Facts
Sol Diamond (plaintiff) performed services for Philip Kargman so Kargman could obtain a mortgage to purchase a property. In exchange, Kargman gave Diamond an interest in the venture that gave Diamond rights to a percentage of the proceeds or losses from an eventual sale of the property. When the property sold, Diamond acquired the interest and soon thereafter sold the interest for $40,000. The Commissioner of Internal Revenue (the Commissioner) (defendant) determined that the $40,000 was compensation received by Diamond for his services to Kargman and was therefore taxable as ordinary income pursuant to § 61 of the Internal Revenue Code. However, Diamond argued that § 721 should apply, which provides that no gain or loss is recognized by a partner who contributes property to a partnership in exchange for an interest in the partnership.
Rule of Law
Issue
Holding and Reasoning (Raum, J.)
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