Unpublished Dispositionpeter R. Fink; Karla S. Fink, Petitioners-appellants, v. Commissioner of Internal Revenue, Respondent-appellee, 827 F.2d 769 (6th Cir. 1987)

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U.S. Court of Appeals for the Sixth Circuit - 827 F.2d 769 (6th Cir. 1987) August 20, 1987


Before KRUPANSKY and MILBURN, Circuit Judges, and JOINER, Senior District Judge* .

This case is before the court on remand from the United States Supreme Court. Peter and Karla Fink, the principal shareholders of a financially troubled corporation, surrendered some of their shares to the corporation in an effort to increase the attractiveness of the corporation to outside investors. On their 1976 and 1977 joint returns, the Finks claimed ordinary loss deductions equal to their adjusted basis in the surrendered shares. The Commissioner disallowed the claimed deductions, and the Tax Court affirmed. The Tax Court held that a non-pro rata surrender of shares to the issuing corporation to improve its financial position is not an event that permits recognition of loss and constitutes, instead, a contribution to the corporation's capital.

We reversed the Tax Court, holding that a non-pro rata stock surrender does not constitute a contribution to capital and gives rise to an immediate ordinary loss. Fink v. Commissioner of Internal Revenue, 789 F.2d 427 (6th Cir. 1986). The Supreme Court, however, reversed, holding that 'a dominant shareholder who voluntarily surrenders a portion of his shares to the corporation, but retains control, does not sustain an immediate loss deductible from taxable income.' Commissioner of Internal Revenue v. Fink, 55 U.S.L.W. 4937, 4940 (U.S. June 22, 1987). The Supreme Court thus remanded the case to this court for further proceedings in conformity with its opinion. Pursuant to the Supreme Court's mandate, it is ordered that our prior decision be VACATED and the decision of the Tax Court be AFFIRMED.


The Honorable Charles W. Joiner, Senior Judge, United States District Court for the Eastern District of Michigan, sitting by designation