Taylor v. Commissioner of Internal Revenue

The facts were stipulated. Petitioners and their wives owned all the stock of the T.F. Co. which they sold in May, 1925, to B.U. Co. for $750,000 and 10,000 shares of stock. The tax on the profits of this sale is not involved in the case before us, although the transaction which is the subject of this controversy grew out of this sale. As one of the considerations of this sale petitioners entered into a written agreement with T.F. Co. wherein they agreed, in consideration of the transfer of Liberty Bonds of the par value of $145,000 to them, to "assume and pay all additional United States income and excess profits taxes ultimately found to be due from T.F. Company for the years 1917 to 1924 inclusive." They also agreed to save T.F. Co. harmless and defend it without expense against all claims and demands of the United States Government for any additional income and excess profits tax for said years.