Garber Industries v. Commissioner
United States Court of Appeals for the Fifth Circuit
435 F.3d 555 (2006)
- Written by Eric Miller, JD
Facts
Charles Garber owned 68 percent of the stock in Garber Industries Holding Company, Inc. (Garber Industries) (plaintiff). Kenneth Garber, Charles’s brother, owned 26 percent of the Garber Industries stock. In 1996 a reorganization caused Charles’s ownership to change from 68 to 19 percent and Kenneth’s to change from 26 to 65 percent. In 1998 Kenneth and his wife sold all their shares to Charles, whose ownership of the stock rose from 19 to 84 percent. Garber Industries deducted $808,935 as a net-operating-loss carryover. The Commissioner of Internal Revenue (the commissioner) (defendant) assessed a deficiency, reasoning that the 1998 sale constituted an ownership change under § 382 of the Internal Revenue Code, triggering an automatic limitation on the deductible amount of a net operating loss. The allowable deduction was limited to $121,258. Garber Industries challenged the assessment in the United States Tax Court. The court found in favor of the commissioner. Garber Industries appealed. The United States Court of Appeals for the Fifth Circuit granted certiorari.
Rule of Law
Issue
Holding and Reasoning (Davis, J.)
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