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McAllister v. Commissioner

United States Court of Appeals for the Second Circuit
157 F.2d 235 (2d Cir. 1946), 330 U.S. 826 (1947)


Ms. McAllister (plaintiff) inherited a life-estate interest in a trust, which entitled her to receive payments for life. McAllister accepted a $55,000 payment from the trust remainderman in exchange for her release of the life-estate interest and her consent to a court-ordered termination of the trust. For federal income-tax purposes, McAllister claimed a capital loss reflecting the difference between the $55,000 payment that she received and the computed value of her life estate. The federal tax commissioner (commissioner) (defendant) determined that the $55,000 payment constituted an advance payment of the income that McAllister would receive from the trust and thus should be taxed as gross income. The commissioner also disputed McAllister’s computation of the value of the life estate. The United States Tax Court entered judgment in favor of the commissioner. McAllister appealed to the United States Court of Appeals for the Second Circuit.

Rule of Law


Holding and Reasoning (Clark, J.)

Dissent (Frank, J.)

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