Turnbow v. Commissioner
United States Supreme Court
368 U.S. 337 (1961)
Grover D. Turnbow (plaintiff) owned all stock of International Dairy Supply Company (International). Turnbow transferred his International stock to Foremost Dairies, Inc. (Foremost) in exchange for cash and a minority percentage of Foremost’s common stock. In total, the cash and stock exceeded his basis in the International stock by over $4,000,000. Turnbow’s tax return reflected only a gain on the cash he received in the transfer and did not account for any gain on the Foremost stock. However, the Commissioner of Internal Revenue (the Commissioner) (defendant) assessed a deficiency and determined that the full gain, including both the cash and stock, was recognizable. The tax court held that only the gain on cash was recognizable, but the United States Court of Appeals for the Ninth Circuit reversed and held that that the gain was recognizable in full. The United States Supreme Court granted certiorari.
Rule of Law
Holding and Reasoning (Whittaker, J.)
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