Gerald Martin Zelmanowitz, A/K/A Paul Maris, and Lillian Zelmanowitz, A/K/A Lillian Maris v. United States

Gerald and Lillian Zelmanowitz brought suit against the United States for abatement of a penalty tax assessed against them for executing allegedly false certificates of prior American ownership of foreign stock. Gerald Zelmanowitz used the certificates to qualify his sales of foreign stock under an exclusion to the interest equalization tax (“IET”) which was then in effect. The district court granted partial summary judgment in favor of the Zelmanowitzs on this issue. Because the plain language of the Internal Revenue Code then in effect did not cover the Zelmanowitzs’ transactions, we affirm.

During the period from 1965 to 1967, Gerald Zelmanowitz was heavily involved in “arbitrage,” whereby he purchased foreign stocks and immediately resold them in New York, taking advantage of slightly higher American prices. Because this kind of activity had a detrimental effect on the balance of payments between the United States and foreign countries, Congress passed the Interest Equalization Tax Act of 1964, Pub.L.No. 88-563, 78 Stat. 809 (1964), to discourage it. See [1964] U.S.Code Cong. & Ad.News 3478-3557. The Act was repealed by the Tax Reform Act of 1976, Pub.L. 94-455 § 1904 , 90…