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McWilliams v. Commissioner, 331 U.S. 694 (1947)

McWilliams v. Commissioner of Internal Revenue

No. 945

Argued May 8, 1947

Decided June 16, 1947

331 U.S. 694


1. In order to establish tax losses, a husband who managed the separate estate of his wife, as well as his own, ordered his broker to sell certain stock for the account of one of the two and to buy the same number of shares of the same stock for the other at as nearly the same price as possible. The sales were made to, and the purchases from, unknown strangers through a stock exchange, and the buying spouse received stock certificates different from those which the other had sold.

Held: deductions in their separate income tax returns for losses on such sales are forbidden by § 24(b) of the Internal Revenue Code, as losses from "sales or exchanges of property, directly or indirectly . . . [b]etween members of a family." Pp. 331 U. S. 695-703.

2. The purpose of § 24(b) was to put an end to the right of taxpayers to choose, by intra-family transfers and other designated devices, their own time for realizing tax losses on investments which, for most practical purposes, are continued uninterrupted -- regardless of the manner in which the transfers are accomplished. Pp. 331 U. S. 700-701.

3. The words "directly or indirectly" in § 24(b) preclude a construction which would limit the prohibition to direct intra-family transfers or to those in which the units of fungible property sold by one spouse and those bought by the other are identical. Pp. 331 U. S. 702-703.

158 F.2d 637, affirmed.

The Tax Court expunged deficiency assessments for losses realized from indirect intra-family transfers of stocks. 5 T.C. 623. The Circuit Court of Appeals reversed. 158 F.2d 637. This Court granted certiorari. 330 U.S. 814. Affirmed, p. 331 U. S. 703.

Page 331 U. S. 695

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