Roy Miller and Artie Miller v. Commissioner of Internal Revenue

This is an appeal from a Tax Court decision which held the taxpayers, Roy and Artie Miller, not liable for the deficiency asserted by the Commissioner in his Notice of Deficiency of August 31, 1970, pertaining to the taxpayers’ return for the calendar year 1967. The essence of this case best can be revealed by quoting from the Commissioner’s Notice. Its Explanation of Adjustments reads:

After certain adjustments the determined deficiency amounted to $1,299.50.

As the Explanation indicates, the Commissioner insists that the sale of equipment by Miller’s Markets, a bona fide Subchapter S corporation engaged in carrying on a trade or business, to Carsan Investment Company, also a bona fide corporation engaged in carrying on a trade or business, was, for purposes of section 1239, an indirect sale by the taxpayers to Carsan because of their ownership of more than 80% in value of the stock of both corporations. The Tax Court rejected this characterization of the transaction and so do we. As a consequence, we affirm the decision of the Tax Court.

We begin by observing that the Commissioner, to support his position, does not rely on the fact that Miller’s Markets is a…