Edwin C. Hollenbeck and Kathryn J. Hollenbeck, Wade G. Ellis and Anita l.ellis v. Commissioner of Internal Revenue

Edwin C. Hollenbeck and his wife, Kathryn, and Wade G. Ellis and his wife, Anita, appeal from a decision of the Tax Court, entered August 19, 1968, which upheld the Commissioner’s assessment of deficiencies in the Hollenbecks’ and Ellis’ joint individual income tax returns in the amounts of $8,991.73 and $7,689.47 respectively. Jurisdiction of this court is under 26 U.S.C. § 7482 .

Appellants contend that they are entitled to ordinary loss treatment on the capital stock they received in cancellation of the indebtedness of Imperial Concrete Products Corporation to them under the provisions of the Small Business Tax Revision Act of 1958, as “Section 1244” stock. Section 1244 of the Internal Revenue Code of 1954. 26 U.S.C. § 1244 . Appellee, Commissioner of Internal Revenue, urges the correctness of the Tax Court decision to the effect that the stock in question did not qualify under Section 1244 for reasons stated in that opinion. We agree with appellee and affirm the decision of the Tax Court.

The relevant transactions out of which the deficiencies arose are as follows: Hollenbeck and Ellis were general partners in Southwestern Investment Company, which successfully engaged in…