Stevens Pass, Inc. v. Commissioner of Internal Revenue
United States Tax Court
48 T.C. 532 (1967)
- Written by Heather Ryfa, JD
Facts
Donald Adams, Bruce Kehr, and John Caley were shareholders in Stevens Pass Company (old company). Adams and Kehr owned 50 shares each of the 100 total shares of voting stock, and Caley owned 33 and one-third shares of nonvoting stock, which was 100 percent of the issued nonvoting stock. Due to a dispute among the shareholders, a new company, Stevens Pass, Inc. (plaintiff), was formed. The shares of the old company were sold to Stevens Pass in exchange for a total of $650,000. Stevens Pass shares were sold to outside investors; Kehr purchased 120 shares, and Caley purchased 80 of the 400 issued shares. The old company then was liquidated. Stevens Pass increased its basis in the old company’s assets to the total amount paid plus the liabilities assumed from the old company. The commissioner of the Internal Revenue Service (defendant) assessed taxes against Stevens Pass, contending that the transaction through which Stevens Pass obtained the assets of the old company was a nontaxable contribution of capital by Kehr and Caley rather than a sale. Stevens Pass appealed the assessment to the United States Tax Court.
Rule of Law
Issue
Holding and Reasoning (Fay, J.)
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