¶1dissenting: I respectfully disagree with, the conclusion reached by the majority. It is not only inequitable but also inconsistent with the legislative history behind section 351 and its predecessors. See H. Rept. No. 350, 67th Cong., 1st Sess., p. 10 (1921); S. Rept. No. 275, 67th Cong,, 1st Sess., p 11 (1921); and Helvering v. Cement Investors, 316 U.S. 527 (1942). Instead, I agree with the holding of the Ninth Circuit, reversing 42 T.C. 1130, in Estate of Schmidt v. Commissioner, 355 F. 2d 111 (C.A. 9, 1966).
50 T.C. 98
Schuster v. Commissioner
Decided April 17, 1968
United States Tax Court · decided 1968-04-17
T transferred the entire business of his sole proprietorship, including accounts receivable, in exchange for all the capital stock of a corporation in a transaction which qualified for nonrecognition… Held: T was not entitled to a deduction for an addition to the proprietorship's bad debt reserve in the year of the transfer. Held, further, the remaining balance in the bad debt reserve must be restored to income in that year.
Cited by 7 later decisions (1 by the Supreme Court) — most recently May 1971
1 federal appellate ·
Relies on Helvering v. Cement Investors, Inc. · Estate of Heinz Schmidt, Deceased, and Charlotte Schmidt v. Commissioner of Internal Revenue · Schmidt v. Commissioner
Good law ✅— No negative treatment on recordhow we know
Decision will be entered for the respondent · Decided 1968-04-17
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