From our private database of 39,700+ case briefs...
Kean v. Commissioner
United States Court of Appeals for the Ninth Circuit
469 F.2d 1183 (1972)
Ocean Shores Bowl (Ocean Shores) was a Washington corporation. In 1962 Ocean Shores filed an election pursuant to § 1362 of the Internal Revenue Code to be taxed as an S corporation by the consent of its shareholders (plaintiffs). After electing for Ocean Shores to be an S corporation, the shareholders deducted their pro rata share of Ocean Shores’ losses on their personal 1962 and 1963 income-tax returns. One of the shareholders was William MacPherson, who owned 125 shares of Ocean Shores stock. William and his brother, Murdock MacPherson, coowned a real estate company called MacPhersons, Inc., and made many investments together. William’s Ocean Shores shares were purchased with a check from MacPhersons, Inc. Even though Murdock was not a shareholder of record in Ocean Shores and did not participate in the Subchapter S election, he deducted one-half of William’s pro rata share of Ocean Shores’ operating losses on his 1962 and 1963 income-tax returns. In 1965, after an Internal Revenue Service audit discovered these facts about Murdock, the Commissioner of Internal Revenue (the Commissioner) disallowed the deductions taken by all the Ocean Shores shareholders. The Commissioner reasoned that Murdock was a beneficial owner of Ocean Shores stock and, as a result, the election by the shareholders to convert Ocean Shores into an S corporation was invalid because it did not receive unanimous consent from the shareholders. The shareholders argued that because Murdock was not a shareholder of record, he was not a shareholder for purposes of the Subchapter S election. The United States Tax Court agreed with the Commissioner’s determination and disallowed the loss deductions. The tax court also denied the shareholders’ request to extend the deadline for the shareholders to file a valid election. The shareholders appealed.
Rule of Law
Holding and Reasoning (Byrne, 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 645,000 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 645,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 39,700 briefs, keyed to 988 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.