Commissioner of Internal Revenue v. Fink et al. (483 U.S. 89)
U.S. Supreme Court · decided June 22, 1987 · Supreme Court Database (Spaeth)
- Citation
- 483 U.S. 89 · 107 S. Ct. 2729
- Decided
- June 22, 1987
- Term
- October Term 1986
- Vote
- 8–1
- Majority author
- Justice Powell
- Issue area
- Federal Taxation
- Disposition
- Reversed
- Outcome
- Petitioning party won
- Ideological direction
- Liberal
Opinion excerpt
Justice Powell delivered the opinion of the Court. The question in this case is whether a dominant shareholder who voluntarily surrenders a portion of his shares to the corporation, but retains control, may immediately deduct from taxable income his basis in the surrendered shares. I Respondents Peter and Karla Fink were the principal shareholders of Travco Corporation, a Michigan manufacturer of motor homes. Travco had one class of common stock outstanding and no preferred stock. Mr. Fink owned 52.2 percent, and Mrs. Fink 20.3 percent, of the outstanding shares. Travco urgently needed new capital as a result of financial difficulties it encountered in the mid-1970’s. The Finks voluntarily surrendered some of their shares to Travco in an effort to “increase the attractiveness of the corporation to outside investors.” Brief for Respondents 3. Mr. Fink surrendered 116,146 shares in December 1976; Mrs. Fink surrendered 80,000 shares in January 1977. As a result, the Finks’ combined percentage ownership of Travco was reduced from 72.5 percent to 68.5 percent. The Finks received no consideration for the surrendered shares, and no other shareholder surrendered any stock. The effort to attract new investors was unsuccessful, and the corporation eventually was liquidated. On their 1976 and 1977 joint federal income tax returns, the Finks claimed ordinary loss deductions totaling…
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