Sol Lessinger and Edith Lessinger, Appellants v. Commissioner of Internal Revenue,
(CA-2), U.S. Court of Appeals, 2nd Circuit, 88-4110, 3/29/89, 872 F2d 519, Reversing the Tax
Court, 85 TC 824, Dec. 42,489
Bruno Schachner, 595 Madison Ave., New York, N.Y., for appellants. William S. Rose, Jr.,
Assistant Attorney General, Robert S. Pomerance, Gary R. Allen, Barbara I. Hodges, Department
of Justice, Washington, D.C. 20530, for appellee.
OAKES, Chief Judge:
Taxpayers Sol and Edith Lessinger appeal from that portion of a decision of the United States
Tax Court, Charles E. Clapp II, Judge, finding them liable for income taxes of $113,242.55 for the
tax year 1977.
Lessinger v. Commissioner
, 85 T.C. 824 (1985). Because Ms. Lessinger argues
that she is an "innocent spouse" and should escape any liability that may be imposed on her
I.R.C. §6013(e) (Supp. IV 1986), we will review the question of Mr. Lessinger's
liability first. We will refer to him as the taxpayer.
The Tax Court found, and the parties seem to agree, that section 351
of the Internal Revenue
Code governs the transaction at issue here. Section 351
provides for the nonrecognition of
income when a controlling shareholder transfers property to a corporation. The taxpayer here
transferred the assets and liabilities of a proprietorship he operated to a corporation he owned for
reasons entirely unrelated to tax planning. It is clear that he was oblivious to the ramifications of