Pinellas Ice Cold Storage Co v. Commissioner of Internal Revenue
| Decision Date | 09 January 1933 |
| Docket Number | No. 182,182 |
| Citation | 53 S.Ct. 257,287 U.S. 462,77 L.Ed. 428 |
| Parties | PINELLAS ICE & COLD STORAGE CO. v. COMMISSIONER OF INTERNAL REVENUE |
| Court | U.S. Supreme Court |
Messrs. Albert L. Hopkins and Jay C. Halls, both of Chicago, Ill., for petitioner.
Messrs. William D. Mitchell, Atty. Gen., and Whitney North Seymour, of Washington, D.C., for respondent.
Petitioner, a Florida corporation, made and sold ice at St. Petersburg. Substantially the same stockholders owned the Citizens' Ice & Cold Storage Company, engaged in like business at the same place. In February, 1926, Lewis, general manager of both companies, began negotiations for the sale of their properties to the National Public Service Corporation. Their directors and stockholders were anxious to sell, distribute the assets, and dissolve the corporations. The prospective vendee desired to acquire the properties of both companies, but not of one without the other.
In October, 1926, agreement was reached and the vendor's directors again approved the plan for distribution and dissolution. In November, 1926, petitioner and the National Corporation entered into a formal written contract conditioned upon a like one by the Citizens' Company. This referred to petitioner as 'vendor' and the National Corporation as 'purchaser.' The former agreed to sell the latter to purchase the physical property, plants, etc., 'together with the goodwill of the business, free and clear of all defects, liens, encumbrances, taxes and assessments for the sum of $1,400,000, payable as hereinafter provided.' The specified date and place for consummation were 11 a.m., December 15, 1926, and 165 Broadway, New York City, when The balance of the purchase price ($1,000,000) shall be paid $500,000 on or before January 31, 1927; $250,000 on or before March 1, 1927; $250,000 on or before April 1, 1927. Also, the deferred installments of the purchase price shall be evidenced by the purchaser's 6 per cent. notes, secured either by notes or bonds of the Florida West Coast Ice Company, thereafter to be organized to take title, or other satisfactory collateral; or by 6 per cent. notes of such Florida company secured by first lien on the property conveyed, or other satisfactory collateral.
The vendor agreed to procure undertakings by E. T. Lewis and Leon D. Lewis not to engage in manufacturing or selling ice in Pinellas county, Fla., for ten years.
The $400,000 cash payment was necessary for discharge of debts, liens, incumbrances, etc. The Florida Company, incorporated December 6, 1926, took title to the property and executed the purchase notes secured as agreed. These were paid at or before maturity except the one for $100,000, held until November, 1927, because of flaw in a title. As the notes were paid petitioner immediately distributed the proceeds to its stockholders according to the plan.
The property conveyed to the Florida Company included all of petitioner's assets except a few vacant lots worth not more than $10,000, some accounts—$3,000 face value—also, a small amount of cash. Assets, not exceed- ing 1 per cent. of the whole, were transferred to the Citizens' Holding Corporation as trustee for petitioner's stockholders—99 per cent. of all vendor's property went to the Florida Company. The plan of the whole arrangement as carried out was accepted by petitioner's officers and stockholders prior to November 4, 1926.
The Commissioner of Internal Revenue determined that the petitioner derived taxable gain exceeding $500,000 and assessed it accordingly under the Revenue Act of 1926. The Board of Tax Appeals and the Circuit Court of Appeals approved this action.
The facts are not in controversy. The gain is admitted; but it is said this was definitely exempted from taxation by section 203, Revenue Act of 1926 (26 USCA § 934).
The Act approved February 26, 1926, c. 27, 44 Stat. 9, 11, 12 (sections 202, 203 (26 USCA §§ 933, 934)):
'(b) * * *
'(c) The amount realized from the sale or other disposition of property shall be the sum of any money received plus the fair market value of the property (other than money) received.
'(d) In the case of a sale or exchange, the extent to which the gain or loss determined under this section shall be recognized for the purposes of this chapter shall be determined under the provisions of section 934 (203).
'(e) * * *'
'Sec. 203. (a) Upon the sale or exchange of property the entire amount of the gain or loss, determined under section 202, shall be recognized, except as hereinafter provided in this section.
'(b) (1) * * * (and) (2) * * *
'(3) No gain or loss shall be recognized if a corporation a party to a reorganization exchanges property, in pursuance of the plan of reorganization, solely for stock or securities in another corporation a party to the reorganization.
'(4) * * * (and) (5) * * *
'(c) * * * (and) (d) * * *
'(e) If an exchange would be within the provisions of paragraph (3) of subdivision (b) if it were not for the fact that the property received in exchange consists not only of stock or securities permitted by such paragraph to be received without the recognition of gain, but also of other property or money, then—
'(1) If the corporation receiving such other property or money distributes it in pursuance of the plan of reorganization, no gain to the corporation shall be recognized from the exchange, but
'(2) If the corporation receiving such other property or money does not distribute it in pursuance of the plan of reorganization, the gain, if any, to the corporation shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other property so received, which is not so distributed. * * *
'(h) As used in this section and sections 201 and 204—
'(1) The term 'reorganization' means (A) a merger or consolidation (including the acquisition by one corporation of at least a majority of the voting stock and at least a majority of the total number of shares of all other classes of stock of another corporation, or substantially all the properties of another corporation), or (B) a transfer by a corporation of all or a part of its assets to an- other corporation if immediately after the transfer the transferor or its stockholders or both are in control of the corporation to which the assets are transferred, or (C) a recapitalization, or (D) a mere change in identity, form, or place of organization, however effected.
'(2) The term 'a party to a reorganization' includes a corporation resulting from a reorganization and includes both corporations in the case of an acquisition by one corporation of at least a majority of the voting stock and at least a majority of the total number of shares of all other classes of stock of another corporation.'
All of section 203(a) and (b) of the act (26 USCA § 934(a, b), is in the margin.1
Counsel ...
To continue reading
Request your trial
-
Heverly v. C. I. R.
...203 which we have quoted. 60 F.2d at 940. The Supreme Court adopted Judge Hand's analysis in Pinellas Ice Co. v. Commissioner, 287 U.S. 462, 470, 53 S.Ct. 257, 260, 77 L.Ed. 428 (1933), and applied it in several cases thereafter. See, e. g., Helvering v. Alabama Asphaltic Limestone Co., 315......
-
Maine Steel, Inc. v. United States
...not met. The continuity of interest rule was introduced by the United States Supreme Court in Pinellas Ice & Cold Storage Co. v. Commissioner, 1933, 287 U.S. 462, 53 S.Ct. 257, 77 L.Ed. 428. Since Pinellas, it has been judicially recognized that a transaction may not qualify as a tax free r......
-
Lammerts v. Comm'r of Internal Revenue (In re Estate of Lammerts) , Docket Nos. 6819-65
...of ‘continuity of interest’ and ‘business purpose’ have long been accepted tools for decision. E.g., Pinellas Ice Co. v. Commissioner, 287 U.S. 462 (1933); Helvering v. Alabama Asphaltic Limestone Co., supra; Gregory v. Helvering, 293 U.S. 465 (1935). The ‘continuity of business enterprise’......
-
The South Bay Corporation v. CIR
...Co. v. Commissioner of Internal Revenue, 2d Cir. 1932, 60 F.2d 937, 940; cf. Pinellas Ice & Cold Storage Co. v. Commissioner of Internal Revenue, 1933, 287 U.S. 462, 470, 53 S.Ct. 257, 77 L.Ed. 428. The necessary consequence, it is argued, is that under the provisions of § 113(a) (7) of the......
-
Assessing the value of the proposed "no net value" regulations.
...See Treas. Reg. § 1.368-1(e). (118) See Le Tulle v. Schofield, 308 U.S. 415 (1940); Pinellas Ice & Cold Storage Co. v. Commissioner, 287 U.S. 462 (119) See Rev. Proc. 77-37, 1977-2 C.B. 568. The case law has generally held that 40 percent is sufficient to satisfy continuity. In additio......
-
Mergers and Acquisitions in Colorado: a Practitioner's Roadmap
...v. Helvering, 296 U.S. 374 (1935), Minnesota Tea Co. v. Helvering 302 U.S. 609 (1938), Pinellas Ice & Cold Storage Co. v. Commissioner, 287 U.S. 462 (1933), and LeTulle v. Scofield 308 U.S. 415 (1940). For an excellent discussion of all aspects of corporate reorganizations (as well as the v......
-
Getting back to basics - proposed continuity regulations.
...has been developed by the courts; see Cortland Specialty Co., 60 F2d 937 (2d Cir. 1932), Pinellas Ice & Cold Storage Co., 287 US 462 (1933), and Nelson, 296 US 374 (1935). Generally, the courts have required target corporation shareholders to maintain a continuing interest in the target......
-
"g" Reorganizations: Tax Planning for Corporate Insolvency
...368 U.S. 828 (1961). 2378 15. Id. at 287. 16. Supra, note 10 at 36. 17. IRC § 381(a). 18. Pinellas Ice & Cold Storage Co. v. Commissioner, 287 U.S. 462 (1932); Cortland Specialty Co. v. Commissioner, 60 F.2d 937 (2d Cir. 1932). 19. 1980-2 C.B. 117. 20. Jason L. Honigman, 55 T.C. 1067 (1971)......