Southwest Consol. Corp. v. Commissioner

Southwest Consolidated Corporation v. Commissioner.

Southwest Consol. Corp. v. Commissioner

Docket No. 6650.

United States Tax Court

1946 Tax Ct. Memo LEXIS 294; 5 T.C.M. (CCH) 6; T.C.M. (RIA) 46011;

January 11, 1946

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Distributions by corporations: In kind: Appreciation in value. - Taxpayer realized no taxable income by virtue of a distribution in kind to its stockholders of property which had appreciated in value between the time of its acquisition and of its distribution, where it was found that immediately prior to the distribution taxpayer had no earnings or profits and that the property in question was purchased out of capital and not out of earnings or profits.

A. O. Dawson, Esq., 61 Broadway, New York 6, N. Y., for the petitioner. William A. Schmitt, Esq., for the respondent.

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OPPER

Memorandum Opinion

OPPER, Judge: Respondent determined deficiencies in income and declared value excess profits taxes for the year 1942 in the respective amounts of $49,228.74 and $12,588.42 which petitioner contests. The case was submitted on a stipulation of facts and the brief testimony of a single witness. The return for the period in question was filed with the collector for the district of Delaware.

[The Facts]

The stipulated facts are hereby found. The question which these facts present is whether petitioner corporation realized taxable income by virtue of a distribution in kind to its stockholders of property which had appreciated in value between the time of its acquisition and of its distribution. Immediately prior to the distribution petitioner had no accumulated earnings or profits. From the testimony we find that the property in question was purchased out of capital and not out of earnings or profits.

[Opinion]

Petitioner contends and respondent concedes that this proceeding is exactly comparable with Commissioner v. Hanan (C.C.A., 2nd and 3rd Cir.), Fed. (2d) (Aug. 9, 1945) (Prentice-Hall 1945 Federal Tax Service, [*] 71091), affirming without opinion a memorandum opinion of the Tax Court Furthermore, whether correctly or not , has repeatedly been construed as disposing of the present question adversely to respondent's contention. See, e.g., , affirmed (C.C.A., 6th Cir.), ; . If, as respondent suggests, there is no useful purpose in a repetition by him of the arguments there advanced, there is equally little to be gained by repetition here of the reasoning upon which those cases rest. Suffice it to say that on the authority thereof, and particularly of the Hanan case, respondent's determination in this respect is overruled.

By virtue of other issues now uncontested.

Decision will be entered under Rule 50.