Estate of Stranahan v. Commissioner
United States Court of Appeals for the Sixth Circuit
472 F.2d 867 (1973)
Stranahan (plaintiff) sold his son the right to receive $122,820 in future Champion Spark Plug dividends for $115,000 in present value, specifically to accelerate income into 1964 and fully utilize an interest deduction that year exceeding his actual income, then instructed Champion's transfer agent to divert future dividends directly to his son; when Champion paid $40,050 in dividends to the son the following year and the son reported that income himself, the Commissioner (defendant) recharacterized the arrangement as a disguised loan, taxing Stranahan on the $40,050, and the Tax Court agreed.
Whether a taxpayer can escape tax liability for future income from property if he assigns the future income in a bona fide sale for valuable consideration.