Court Opinion

ID: 4480095
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:14:03.065192+00
Date Added: 2024-06-11T08:48:28.340917
License: Public Domain

Bruce, </., dissenting: I respectfully dissent from the opinion of the majority on the first issue. In my opinion, petitioner did not own more than 80 percent in value of the outstanding stock of Trotz Construction, Inc., within the meaning of section 1239 of the Internal Revenue Code of 1954, at the time he sold his construction equipment to the corporation. Section 1239 (a) (2) denies capital gains treatment with respect to profits received by an individual upon the sale of depreciable property used in his trade or business to a corporation “more than 80 percent in value of the outstanding stock of which is owned by such individual, his spouse, and his minor children and minor grandchildren.” (Emphasis supplied.) The word “owned” does not mean “in effect,” “tantamount to,” or “in substance.” As was stated by the Court of Appeals for the Fourth Circuit in the case of Mitchell v. Commissioner, 300 F. 2d 533, 536 (1962), reversing 35 T.C. 550: the Internal Revenue Code is specific whenever tax consequences depend upon the equitable ownership of stock, as contrasted to its legal ownership. The failure to specify in section 1239 that beneficial ownership is to he included in computing the 80% limit strongly indicates thiat the beneficial ownership of stock is not to be counted. In my opinion, stock which is not owned but which the taxpayer had only a contract right to acquire, is likewise not to be included in computing the 80-percent limit provided by the statute. On this issue I would hold for the petitioner.