TAXATION-INCOME TAX-DEDUCTION FOR WORTHLESS STOCK-OBJECTIVE v. SUBJECTIVE TEST

Authors

Rosemary Scott, University of Michigan Law SchoolFollow

Abstract

The taxpayer held stock in a corporation - which had been in receivership for five years, and which had, during all of that time, liabilities substantially exceeding its assets. When the receivership was ended and when a derivative suit against the management was compromised, the taxpayer declared the stock to be worthless and claimed a deduction for 1937. The commissioner denied the deduction on the ground that the stock had not become worthless in 1937. The Tax Court sustained this ruling and the circuit court of appeals affirmed. Held, the value of the stock should be determined by an objective test based on "identifiable events" rather than by the subjective test based on the taxpayer's reasonable and honest belief supported by his conduct, and the finding on this question of fact by the Tax Court should be conclusive. The decision of the lower court affirmed. Lillian Boehm v. Commissioner of Internal Revenue, (U.S. 1945) 66 S.Ct. 120.

Recommended Citation

Rosemary Scott, TAXATION-INCOME TAX-DEDUCTION FOR WORTHLESS STOCK-OBJECTIVE v. SUBJECTIVE TEST, 44 Mich. L. Rev. 879 (1946).
Available at: https://repository.law.umich.edu/mlr/vol44/iss5/23