United States Supreme Court Cases & Opinions

U.S. Supreme Court

Braunstein v. Commissioner, 374 U.S. 65 (1963)

Braunstein v. Commissioner

No. 476

Argued April 29, 1963

Decided June 10, 1963

374 U.S. 65

Syllabus

In 1948, three taxpayers received a commitment from the Federal Housing Administration to insure loans for the construction of a multiple-dwelling apartment project. Two corporations were formed to carry out the project, and each of the three taxpayers was issued one-third of the stock in each corporation. After the costs of the construction had been paid, each of the corporations had an unused amount of mortgage loan funds remaining, and, in 1950, the taxpayers sold their stock at a profit, receiving as part of the sale transaction distributions from the corporations which included the unused funds.

Held: Under § 117(m) of the Internal Revenue Code of 1939, the resulting gains to the taxpayers must be treated as ordinary income, instead of long-term capital gains, since the corporations were "collapsible" within the meaning of that section. Pp. 374 U. S. 65-73.

305 F.2d 949, affirmed.