Tax Problem 1-51
An apartment house, Mayfield Court Apartments, was the sole asset of the respondent corporation, had been transferred in the form of a liquidating dividend to the corporation's two shareholders. They in turn lawfully conveyed it to a purchaser who had originally negotiated for the purchase from the corporation. The respondent corporation was organized in 1934 solely to buy and hold the apartment building which was the only property was ever owned by it. All of the outstanding stock was owned by Minnie Miller and her husband. Its only business was the leasing of the building. The case at hand is (CIR v. Court Holding Co., 33 AFTR 593 (1945)). Between October 1, 1939 and February, 1940 negotiations for its sale took place between…show more content… An oral agreement was made as to the terms and conditions of sale. When time came to prepare a written agreement, it was written but never implemented. The business’s attorney informed the stockholders the sale would result in a major tax fine on the corporation. The corporation then declared a “liquidating dividend” this lead to Mr. and Mr. Miller surrendering their stocks. A contract was made granting the Millers as vendors and the Fines as vendees with the same terms and conditions of sale that was previously agreed upon. Three days later, the property was conveyed to the Fines. The question is whether the Circuit Court of Appeals properly reversed the Tax Court's conclusion that the corporation was taxable under Section 22 of the Internal Revenue Code for the gain which accrued from the sale. The Tax Court concluded despite the statement of a 'liquidating dividend' followed by the transfers of legal title, the company had not abandoned the transactions negotiations. The court findings are in Dob v. CIR, 320 U.S. 489 , 64 S.Ct. 239; CIR v. Heininger, 320 U.S. 467 , 64 S.Ct. 249; CIR v. Scottish American Investment Co., 323 U.S. 119 , 65 S.Ct. 169. The issue with CIR v. Court Holding Co. exhibits strongly similar facts as the case of U.S. v. Cumberland Public Service Co. W. L. McComas and E. S. Mayes and their
