Brief Fact Summary. Petitioner managed his and his wife’s large estates. In so doing, he would instructed his broker to sell stock of one, and buy for the other account, in order to establish certain losses. These losses were deducted from their gross income.
Synopsis of Rule of Law. Deductions are prohibited for losses from sales or exchanges of property, directly or indirectly, between family members.
Section 24 (b) states an absolute prohibition--not a presumption--against the allowance of losses on any sales between the members of certain designated groups.View Full Point of Law
Issue. Are the losses claimed by Petitioner deductible against gross income?
Held. Chief Justice Vinson issued the opinion for the Supreme Court of the United States in holding against Petitioner and finding that the losses are not deductible.
Discussion. The Supreme Court found that the rule was intended to prevent taxpayers from choosing their own time for realizing losses on investments. Petitioner argued that it was not a direct transfer between family members, but the Court noted that the rule prohibits indirect transfers as well.