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Coady v. Commissioner
Citation:
33 T.C. 771 (1960)Facts
For more than five years prior to November 15, 1954, Christopher Construction Company had been engaged in the active conduct of a construction business in Columbus, Ohio. The company undertook approximately six construction contracts per year, with gross receipts between $1.5 million and $2 million annually. The company’s stock was owned equally by M. Christopher and Edmund P. Coady, with each holding 50% after April 19, 1954. Due to differences between the shareholders, they agreed to divide the business. On November 15, 1954, Christopher Company organized E.P. Coady and Co., transferring to it approximately half of Christopher Company’s assets, including a sewage disposal plant construction contract, equipment, and cash. In exchange, Christopher Company received all of Coady Company’s stock, which it immediately distributed to Edmund Coady in exchange for all of his Christopher Company stock. The fair market value of the Coady Company stock received by Coady was $140,000, while his basis in the surrendered Christopher Company stock was $72,500. After the distribution, both companies continued to actively engage in the construction business. The Commissioner determined that Coady realized a capital gain of $67,500 on the exchange.
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