In the Matter of Charles A. Steen, Debtor. Dick Dimond, Trustee v. United States

The United States appeals from the judgment of the district court adjudicating the government’s claim for federal income tax deficiencies against taxpayer Steen, the debtor in a Chapter XII bankruptcy proceeding, and his trustee in bankruptcy. The case came before the district court on the parties’ cross-petitions for review of a decision of the referee in bankruptcy. Our jurisdiction rests on 28 U.S.C. § 1291 .

The principal question presented is whether the sum of $458,532.03 which Steen received in 1966 is properly treatable as recovery of basis and capital gain, or simply as ordinary income. However, as will become apparent, the answer serves to raise an additional question that will require further proceedings.

The relevant facts are these: In 1952, Steen made an extraordinarily rich uranium discovery in Utah. He subsequently transferred this claim, known as Mi Vida, and others to Utex Exploration Company (Utex), a Utah corporation, in exchange for shares of Utex stock. Utex and others then formed a corporation known as Uranium Reduction Company (URC) to process uranium ore.

In 1962, Atlas Corporation (Atlas), which like Utex owned a substantial portion of the…