John P. McWilliams (plaintiff) managed both his estate and his wife’s. In 1940 and 1941, McWilliams instructed his broker to sell either his or his wife’s securities to the other spouse, for the purpose of establishing tax losses in those years. Each time, the securities were sold through the stock exchange. It was unknown who actually purchased the stock sold by the selling spouse, or from whom the buying spouse purchased the stock. The buying spouse never received the same stock certificates sold by the selling spouse. The Commissioner (defendant) disallowed the deduction of the losses arising from the sale of securities between McWilliams and his wife. The Tax Court overruled the Commissioner. The Court of Appeals reversed. The United States Supreme Court granted certiorari.