Estate of Silverman v. Commissioner

Mose and Rose Silverman owned over 29,000 shares of stock in Olympic Savings and Loan Association (Olympic) in 1982. Late that year, Coast Federal Savings and Loan Association (Coast) offered to purchase all outstanding shares of Olympic stock for $28.5487 per share. Part of the offer was that 30 percent of the purchase price would be paid upfront in a savings account. The other 70 percent would be in a nonwithdrawable six-year savings account. Each account bore interest, but the nonwithdrawable account was a certificate of deposit that was not transferrable except in the case of the owner’s death, after which it would pass to the administrator or executor of the deceased owner’s estate. At the time of the acceptance of the offer by the Silvermans, they received $249,761 in the regular savings account and another $582,776 in the six-year term account. The Silvermans reported the $249,761 on their 1982 income taxes, but not the other $582,776, which they contended was 26 U.S.C. § 453 installment income (and would be reported when they received unfettered access to the funds at the end of the six-year interval). The commissioner of Internal Revenue (defendant) disagreed and found a deficiency of $98,196 in the Silvermans’ 1982 tax return. Mose Silverman also died during this interval, but his estate (plaintiff) filed suit, arguing that under the installment method, the income was not realized in 1982.