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Hempt Brothers, Inc. v. United States

United States Court of Appeals for the Third Circuit
490 F.2d 1172 (1974)

Written by Robert Cane, JD

Facts

A partnership transferred $662,820.20 in accounts receivable to Hempt Brothers, Inc. (plaintiff), a newly formed corporation, in exchange for stock. The Internal Revenue Service (IRS) (defendant) determined that the exchange of assets for stock qualified for nonrecognition under § 351 of the Internal Revenue Code (I.R.C.). Hempt Brothers claimed the accounts receivable were not property for purposes of § 351, so the partners should have been subject to tax when the receivables were transferred to the corporation or upon collection. The district court considered the accounts receivable to be property for tax purposes and found in favor of the IRS. Hempt Brothers appealed to the United States Court of Appeals for the Third Circuit.

Rule of Law

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Issue

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Holding and Reasoning (Aldisert, J.)

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