Monday, April 29, 2013

Overton v. Commissioner case brief

Overton v. Commissioner case brief
162 F.2d 155, 1947 U.S. App. 47-1 U.S. Tax Cas. (CCH) P9292; 47-1 U.S. Tax Cas. (CCH) P10,564

CASE SYNOPSIS: Petitioners appealed Tax Court ruling on gift tax and income tax liability for transfer of stock pursuant to a plan devised to lessen taxes.

FACTS: Pursuant to a plan devised to lessen taxes, petitioners amended their certificate of incorporation to provide for changing the outstanding common stock into 2,000 shares without par value, of which 1,000 were denominated Class A and 1,000 Class B. The old stock was exchanged for the new, the shareholders then gave the B stock to their respective wives, and new certificates were issued to the wives. The B stock had a liquidating value of one dollar per share; everything else on liquidation was to belong to the holders of the A stock, who had also the sole voting rights for directors and all ordinary matters. Under a subsequent agreement restricting alienation of their stock, the wives were precluded from realizing more than one dollar a share by selling their shares. The Tax Court held that the arrangement, though made in the form of a gift of stock, was in reality an assignment of part of the taxpayers' future dividends.

ANALYSIS:
On appeal, the court affirmed that ruling, noting that anticipatory assignments of income, whatever their formal cloak, are ineffective taxwise.

CONCLUSION: The court affirmed the ruling, holding that the arrangement, though made in the form of a gift of stock, was really an assignment of part of the taxpayer's future dividends.
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