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United States v. Stafford

United States v. Stafford

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United States v. Stafford

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  1. United States v. Stafford United States Court of Appeals, Eleventh Circuit, 1984 727 F. 2d 1043

  2. History • Judge: R. Lanier Anderson III • District court, then 11th circuit reverses • Facts similar to James V. Comm. • Stafford has rights to develop land • Needs funding, gets investors to buy in • 20 Units sold at 100K each in Ltd.

  3. History cont. • Transfer of letter of intent from LOG • Stafford has the rights to this development • Is an option “property” to be exchanged? • Since partnership Sec. 721 is at issue.

  4. LOG offers Stafford rights to develop land Stafford forms Ltd. to raise 25% of capital Transfers letter of intent to Ltd. Under 721 Ltd. Obtains financing for 75% from LOG Ltd. Develops land and Leases back to LOG

  5. Issue • Under 721, what qualifies as property? • Money, land, and certain intangibles eg. Trade secrets • In this case, the letter was to Petitioner • In James case, the FHA is to Corp. • Timing issue arises although not discussed in the case. • Exchange and Property requirements

  6. Holding • Letter does qualify as property • Stafford performed services, not for Ltd. • Services prior to forming Ltd. • Leads to tangible property which he transfers into Ltd. • “the Code is designed to prevent the mere change in form from precipitating taxation.”

  7. Reasoning • James transferred property to the corp. that was never really his • Letter was exchanged, just as money or land would be. • Property should have “Value and enforceability” says lower court • Letter has Substantial commitment • Property is similar to goodwill or know-how