Rickey v. United States

592 F.2d 1251 (1979)

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Rickey v. United States

United States Court of Appeals for the Fifth Circuit
592 F.2d 1251 (1979)

Facts

Horace Rickey, Sr., president of Horace B. Rickey, Inc. (the company), owned 1,292 of the company’s 2,255 shares of common stock. Rickey died, survived by three children: Horace Jr., Robert, and Elizabeth (the taxpayers) (plaintiffs). In accordance with Rickey’s will, the company redeemed his 1,292 shares, paying $383,194 to his estate. The taxpayers reported no income on this redemption, which they treated as a complete redemption of stock owned by Rickey. However, the Commissioner of Internal Revenue determined that the distribution essentially functioned as a dividend to the taxpayers as beneficiaries of Rickey’s estate. The taxpayers waived the right to receive statutory notice of deficiencies, paid the newly assessed taxes, and filed for a refund in federal district court. The court ruled in favor of the taxpayers. The United States government (defendant) appealed. The United States Court of Appeals for the Fifth Circuit granted certiorari.

Rule of Law

Issue

Holding and Reasoning (Fay, J.)

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