PAULSEN et ux. v. COMMISSIONER OF INTERNAL REVENUE (469 U.S. 131)
U.S. Supreme Court · decided January 8, 1985 · Supreme Court Database (Spaeth)
- Citation
- 469 U.S. 131 · 105 S. Ct. 627
- Decided
- January 8, 1985
- Term
- October Term 1984
- Vote
- 6–2
- Majority author
- Justice Rehnquist
- Issue area
- Federal Taxation
- Disposition
- Affirmed
- Outcome
- Petitioning party lost
- Ideological direction
- Liberal
Opinion excerpt
Justice Rehnquist delivered the opinion of the Court. Commerce Savings and Loan Association of Tacoma, Wash., merged into Citizens Federal Savings and Loan Association of Seattle in July 1976. Petitioners Harold and Marie Paulsen sought to treat their exchange of stock in Commerce for an interest in Citizens as a tax-free reorganization under 26 U. S. C. §§ 354(a)(1) and 368(a)(1)(A). The Court of Appeals for the Ninth Circuit, disagreeing with the Court of Claims and other Courts of Appeals, reversed a decision of the Tax Court in favor of petitioners. 716 F. 2d 563 (1983). We granted certiorari, 465 U. S. 1021 (1984), to resolve these conflicting interpretations of an important provision of the Internal Revenue Code. At the time of the merger, petitioner Harold T. Paulsen was president and a director of Commerce. He and his wife, petitioner Marie B. Paulsen, held as community property 17,459 shares of “guaranty stock” in Commerce. In exchange for this stock petitioners received passbook savings accounts and time certificates of deposit in Citizens. Relying on 26 U. S. C. §§ 354(a)(1) and 368(a)(1)(A), they did not report the gain they realized on their 1976 federal income tax return because they considered the merger to be a tax-free reorganization. Before it ceased to exist, Commerce was a state-chartered savings and loan association incorporated and operated under…
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