Ralph R. Garrow and Eunice Garrow v. Commissioner of Internal Revenue

Petitioners, husband and wife, invoke the jurisdiction conferred upon us by 26 U.S.C. § 7482 to review a determination of the Tax Court of the United States. The findings of fact and opinion of the court below are reported at 43 T.C. 890 .

In 1961 the petitioning husband, hereinafter called taxpayer, was the sole owner of all the outstanding stock of Diablo Development Co., a California corporation. The corporation adopted a plan of complete liquidation providing for a dis tribution in cancellation or redemption of all its stock. The transfer of its assets pursuant to the liquidation plan was to be accomplished entirely within the month of June, 1961. By executing the proper form on June 8, 1961, the taxpayer elected to have the gain realized on the surrender of his stock recognized and taxed in accordance with section 333, Internal Revenue Code of 1954.

The assets received by the taxpayer in the liquidation included notes receivable, accounts receivable, and a claim for refund of federal income tax, with respective face values of $9473.16, $10,817.40, and $2310.13. During 1961 the taxpayer collected approximately 85% of the face amount of notes receivable, 97% of the face…