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Fender v. United States

United States Court of Appeals for the Fifth Circuit
577 F.2d 934 (1978)


Harris Fender (plaintiff) established a trust for each of his sons. In 1969, the trust had substantial capital gains. In an attempt to offset these gains for tax purposes, on December 26, 1969, Fender sold certain bonds from the trusts to the Longview National Bank & Trust Company for a total of $225,000. The trusts had purchased the bonds for a total of $435,017. Fender owned 40.7 percent of Longview’s stock—the largest block of stock—at the time of the sale. Further, Fender had recently assisted Longview with some financial difficulties. On February 6, 1970, by which time Fender had accumulated 50.15 percent of Longview stock, Longview resold the bonds back to the trusts for a total of $224,735. Fender took a tax deduction for the trusts for the purported loss due to the 1969 sale of the bonds. The Internal Revenue Service (IRS) (defendant) disallowed the deduction. Fender appealed the decision to federal court. The district court ruled in Fender’s favor. The IRS appealed.

Rule of Law


Holding and Reasoning (Ainsworth, J.)

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