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Taxation-Federal Income Tax-Status Of Payment Of Corporate Liability By Stockholder Subsequent To Liquidation, George V. Burbach S.Ed.

Michigan Law Review

Petitioners, from 1937 to 1940, received distributions from the liquidation of a corporation of which they were stockholders and reported the profits thus obtained, classifying them as capital gains pursuant to I.R.C., §115. In 1944, a judgment was rendered against the corporation. Petitioners, as transferees, paid the judgment and took a deduction of 100 per cent, classifying the amount paid as an ordinary business loss. The Commissioner took a contrary position, and held the payment a capital loss. The Tax Court upheld the petitioners' contention but the court of appeals reversed. On appeal, held, affirmed, three Justices dissenting. The …