Income Tax Keyed to Lind
Estate of Stranahan v. Commissioner
Frank Stranahan, Decedent, entered into a closing agreement with the I.R.S. where he agreed that he owed the I.R.S. $754,815 for interest due to unpaid taxes related to several trusts. He paid the amount in 1964. He accelerated his future income to avoid losing the tax benefit of the interest deduction. In order to do so, he executed an agreement wherein he assigned to his son $122,820 in anticipated stock dividends. His son paid him $115,000 by check in consideration. Decedent reported this amount as income. During the tax year in question, dividends of $40,050 were paid to his son. Decedent’s son reported this as income but Decedent did not. The Commissioner of Internal Revenue sent Decedent’s estate, Appellant, a deficiency notice claiming that the dividend was income to the Decedent. The Tax Court found that the assignment was in reality a loan.
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