Brief Fact Summary. Taxpayer paid employees bonuses in the form of stock, and attempted to deduct from income the fair market value of the stock awarded as bonuses. The fair market value of the stock was $24,858 and the cost to Taxpayer was $16,153.
Synopsis of Rule of Law. Gain from the sale or other disposition of property shall be the excess of the amount realized over the adjusted basis.
Issue. May the fair market value of the stock be deducted and is the gain taxable?
Held. Circuit Judge Frank issued the opinion for the United States Sixth Court of Appeals in affirming the order of the Tax Court and holding that the market value was the stock was properly deductible and it was taxable gain.
Discussion. The payment of the stock deleted the Taxpayer’s assets in an amount equal to the fair market value. There was a taxable gain on the difference between the market value and the cost of the shares.