Grove v. Commissioner
United States Court of Appeals for the Second Circuit
490 F.2d 241 (1973)
Philip Grove (plaintiff) founded a corporation, a construction firm, and controlled a majority of the corporation’s shares since its inception. At some point, Rensselaer Polytechnic Institute (RPI) solicited Grove to gift shares of the corporation’s stock to RPI under RPI’s life-income-funds plan. Under the plan, donors received a life interest in the income generated from the donated stock and RPI received full title to the stock upon the death of the donor. Grove agreed to give shares of his corporation to RPI with two main conditions. First, the corporation was not obligated to redeem RPI’s shares. Second, if RPI sold its shares, the proceeds would be invested and managed by an established professional firm, which turned out to be Merrill Lynch. Grove made annual contributions of shares of the corporation to RPI. Eventually, RPI began seeking redemption of its shares by the corporation. Routinely, the corporation would approve the redemption and pay RPI the book value of its redeemed shares. RPI then invested the money received with Merrill Lynch, but Merrill Lynch invested the money as directed by Grove’s personal investment adviser. Merrill Lynch paid the income from those investments to RPI, which then paid Grove according to the life-income-funds plan. Grove reported the payments from RPI as taxable income. The commissioner of the Internal Revenue Service (IRS) (defendant) assessed deficiencies in Grove’s taxable income related to the stock redemption by Grove’s corporation and demanded Grove pay additional taxes on the full value of the stock redemptions. Grove refused and filed a petition in tax court. The tax court found in favor of Grove. The commissioner appealed to the United States Court of Appeals for the Second Circuit.
Rule of Law
Holding and Reasoning (Kaufman, C.J.)
Dissent (Oakes, J.)
What to do next…
Unlock this case brief with a free (no-commitment) trial membership of Quimbee.
You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 706,000 law students since 2011. Some law schools—such as Yale, Berkeley, and Northwestern—even subscribe directly to Quimbee for all their law students.Unlock this case briefRead our student testimonials
Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.
Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students.Learn about our approachRead more about Quimbee
Here's why 706,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 44,400 briefs, keyed to 983 casebooks. Top-notch customer support.
- The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
- Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
- Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.