Zenz v. Quinlivan

213 F.2d 914 (1954)

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Zenz v. Quinlivan

United States Court of Appeals for the Sixth Circuit
213 F.2d 914 (1954)

Facts

Carl Zenz founded Carl Zenz & Associates Company, a closely held corporation. Zenz died, making his widow (the taxpayer) (plaintiff) the owner of all 108 issued shares of stock. The taxpayer subsequently married another man, who took over the corporation. After this marriage ended in divorce, the taxpayer sought to dispose of the business. A prospective buyer purchased 47 shares of the taxpayer’s stock. The corporation redeemed the remaining 61 shares using profits and earnings. However, the Commissioner of Internal Revenue (the commissioner) deemed the redemption to be a taxable dividend and assessed a deficiency. The taxpayer challenged this assessment in federal district court. The court sustained the assessment, reasoning that the taxpayer was attempting to avoid paying taxes on the earnings and profits used for the redemption. The taxpayer appealed. The United States Court of Appeals for the Sixth Circuit granted certiorari.

Rule of Law

Issue

Holding and Reasoning (Gourley, J.)

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