Hall v. Comm'r of Internal Revenue
| Decision Date | 14 July 1947 |
| Docket Number | Docket No. 11836. |
| Citation | 9 T.C. 53 |
| Parties | ALEDA N. HALL, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Pursuant to a separation agreement, petitioner released her rights in her husband's estate. The husband agreed in consideration therefor to pay petitioner $750,000. Later the manner and medium of payment were agreed upon. By this later agreement petitioner, inter alia agreed to accept 6,000 shares of X stock in satisfaction of $360,000 of the $750,000 her husband had agreed to pay her. Held, petitioner's cost basis in X stock is $60 a share and not its fair market value at the time of petitioner's acquisition. Douglas D. Felix, Esq., for the petitioner.
Bernard D. Hathcock, Esq., for the respondent.
Respondent determined a deficiency in petitioner's income tax for the year 1941 in the amount of $1,702.18. Respondent, on brief, conceded an issue relating to the deductibility of charitable contributions. The remaining question involves the determination of the proper cost basis of certain stock sold by petitioner for the purpose of measuring the taxable gain thereon. The return was filed with the collector of internal revenue for the district of Florida.
Petitioner is an individual, residing in Miami Beach, Florida. Prior to her marriage to her present husband, she was married to Don A. Davis. Her marriage to Davis was terminated by divorce. Prior to the divorce petitioner and Davis entered into an agreement dated December 3, 1928. This agreement, as here pertinent, provided:
* * * WHEREAS, the parties hereto were married September 1st, 1909, and are now husband and wife, but have mutually agreed to separate and live apart, and in consideration of said agreement to separate and to finally and henceforth to live separate and apart, each from the other, it is stated and agreed that the said Don A. Davis sets over and delivers unto the said Aleda N. Davis money and securities of the agreed value of Seven Hundred and Fifty Thousand Dollars ($750,000). * * *
In consideration of the money and property so turned over, paid and delivered to the said Aleda N. Davis, she agrees to and does hereby relinquish and releases and does hereby satisfy and quit claim all rights and interest, including dower and homestead, and all other rights arising out of and belonging to the plaintiff on account of the laws of the State of Missouri effecting (sic) the rights or interest of a wife in a husband's property, taking and accepting the property so set over and delivered to her in full satisfaction of all rights whatsoever due and coming to her, or that might be hereafter due and coming to her as the wife of the said Don A. Davis.
Attached to this agreement is a ‘Memorandum of Stock, Bonds and Cash Turned Over to Mrs. Aleda N. Davis (petitioner) by Don A. Davis, December 4th, 1928.‘ This memorandum shows the following:
The amount of $750,000 was agreed upon between petitioner and Davis before the manner and medium of its payment were settled upon between the parties. The schedule set out above represents the parties' agreement as to the manner and medium of paying the $750,000. The value attributed to the shares of Western Auto Class A stock by the parties was arrived at on the basis of its fluctuating market value over a period of several months preceding the agreement.
During 1941 petitioner sold 1,700 shares of the Western Auto class A stock which she had received from Davis under the agreement. In reporting her gain on this sale petitioner used $60 a share as her cost basis for the 6,000 shares acquired from Davis, being the value attributed to such stock by petitioner and Davis for the purpose of the agreement. Respondent, in his deficiency notice, determined that these 6,000 shares had a fair market value of $56 a share when received by petitioner from Davis and that this value constitutes their cost basis to petitioner.
The cost to petitioner of the 6,000 shares of stock received by her from Davis is the question.1 Petitioner claims the cost amounts to the value attributed to the stock for the purpose of the agreement. Respondent contends that the cost amounts to the stock's fair market value when received by petitioner. We agree with petitioner.
We interpret the transaction as follows: In connection with separation and divorce petitioner agreed to relinquish certain rights she...
To continue reading
Request your trial
-
Wallace v. United States
...v. Mesta, 123 F.2d 986 (C.A. 3d) (Pennsylvania); Commissioner v. Halliwell, 131 F.2d 642 (C.A. 2d) (Connecticut); Hall v. Commissioner, 9 T.C. 53 (Florida); Patino v. Commissioner, 13 T.C. 816 (New York); Estate of Stouffer v. Commissioner, 30 T.C. 1244 (Ohio), reversed on another issue, 27......
-
White Farm Equip. Co. v. Comm'r of Internal Revenue , Docket Nos. 4792-69
...264 F.2d 305, 308 (C.A. 2, 1959), affirming 29 T.C. 129 (1957). Cf. Paul A. Johnson, 39 T.C. 473, 480, 481 (1962); Aleda N. Hall, 9 T.C. 53 (1947); Hugh M. Matheson, 31 B.T.A. 493 (1934), affd. 82 F.2d 380 (C.A. 5, 1936). The assigned valuation of the White stock in the agreement is accordi......
-
United States v. Davis Davis v. United States
... ... of Appeals of the Third and Second Circuits, Commissioner of Internal Revenue v. Mesta, 123 F.2d 986 (C.A.3d Cir. 1941); Commissioner of ... continued to apply these views in appropriate cases since that time, Hall v. Commissioner, ... 9 T.C. 53 (1947); Patino v. Commissioner, 13 T.C ... ...
-
Bishop v. Comm'r of Internal Revenue
...Commissioner v. Mesta, 123 F.2d 986 (C.A. 3, 1941), reversing 42 B.T.A. 933 (1940), certiorari denied 316 U.S. 695 (1942); Aleda N. Hall, 9 T.C. 53 (1947), acq. 1947-2 C.B. 2. Cf. United States v. Davis, 370 U.S. 65, ...