Court Opinion

ID: 4476377
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:11:59.40565+00
Date Added: 2024-06-11T15:03:39.413368
License: Public Domain

Hill, /., dissenting: I concur in the dissenting opinion of Judge Arnold, but deem it appropriate to offer some additional observations which I think emphasize the reasons for disagreement with the holding of the majority. It is my opinion that the various transfers of stock were not sales, but were merely transactions in the form of sales to effectuate an evasion of income tax by petitioner. There were involved in the four transfers of stock a total of 1,575 shares. The number of shares in each block of stock transferred had been called for redemption prior to such transfer. It was known by everyone connected with the transactions that such stock had at the time of transfer a redemption value of $100 per share and all of the stock so transferred except the block of 275 shares first transferred had an additional value measured by an accrued dividend of $1.50 per share. It appears therefore that the 1,575 shares involved had a redemption value of $157,500 plus accrued dividends of $1,950, or a total of $159,450. The stock had a value as collateral for loan purposes equal to its redemption value, since the cash for such redemption was already in the possession of the depositary bank, awaiting only the redemption day for its use in liquidating the stock. The transferees of the stock neither invested anything of value in the stock nor assumed any financial risk or hazard in connection with such transfers. It was known by everyone concerned that it was a certainty that the redemption proceeds would meet every financial requirement involved in the transactions. Accordingly, the transfers were so arranged that the redemption value and the redemption money were made available to relieve the transferees of any financial investment, or any financial risk or hazard. It is admitted by the petitioner that the stocks were transferred only for tax reduction purposes. It could not be successfully contended otherwise in the face of the fact that in making such transfers petitioner sacrificed $2,225 of the redemption value of the stock. This was the total amount of the bonuses which petitioner’s friends received for their cooperation in the petitioner’s tax evasion scheme, dearly, the transactions were not sales of the stock but merely an arrangement entered into between petitioner and certain of his friends whereby he received an advance of all but a small portion of the redemption money a few days prior to the date of such redemption. The money which petitioner received was provided by loans to be repaid out of the proceeds of the redemption pursuant to an anticipatory arrangement whereby petitioner received all of the redemption money except the small amount received as bonuses by his accommodating friends, who in reality bought nothing, paid nothing, and assumed no financial risk or hazard for the part they played in petitioner’s tax evasion scheme. While the transactions were invested with the guise of sales, they had no substance as such. To me it appears patent that in reality the money which petitioner received for the stock in question represented the proceeds of liquidation and not of sales of capital assets. HaRRON, J., agrees with this dissent.