292 U.S. 435 (1934), 547, New Colonial Ice Co., Inc. v. Helvering
|Docket Nº:||No. 547|
|Citation:||292 U.S. 435, 54 S.Ct. 788, 78 L.Ed. 1348|
|Party Name:||New Colonial Ice Co., Inc. v. Helvering|
|Case Date:||May 28, 1934|
|Court:||United States Supreme Court|
Argued March 5, 6, 1934
CERTIORARI TO THE CIRCUIT COURT OF APPEALS
FOR THE SECOND CIRCUIT
1. Whether and to what extent deductions of losses shall be allowed in computing income taxes depends upon legislative grace, and only as there is clear statutory provision therefor can any particular deduction be allowed. P. 440.
2. The statutes pertaining to the determination of taxable income have proceeded generally on the principle that there shall be a computation of gains and losses on the basis of a distinct accounting for each taxable year, and only in exceptional situations, clearly
defined, has there been provision for an allowance for losses suffered in an earlier year. P. 440.
3. The statutes also have disclosed a general purpose to confine allowable losses to the taxpayer sustaining them -- i.e., to treat them as personal to him, and not transferable to or usable by another. P. 440.
4. In order to overcome financial difficulties, all the assets, liabilities and business of a corporation were taken over by a new corporation specially organized for the purpose and having substantially the same capital structure, in exchange for a portion of its stock, which was distributed by the older corporation among its stockholders, share for share, thereby retiring the old shares. Creditors were given a supervising management of the new corporation through a stock voting trust until their claims should be paid. The corporate existence of the older corporation continued. Held that the two corporations were distinct entities, and that the new corporation, in the computation of the tax on its net income for succeeding year, was not entitled to deduct earlier losses of the old corporation, under § 204(b) of the Revenue Act of 1921, which provides that, where any "taxpayer" has sustained a net loss, the amount may be deducted from the net income of "the taxpayer" for succeeding tax years. P. 440.
5. As a general rule a corporation and its stockholders are deemed separate entities, and this is true in respect of tax problems. P. 442.
66 F.2d 480 affirmed.
Certiorari, 290 U.S. 621, to review the affirmance of a decision of the Board of Tax Appeals, 24 B.T.A. 886, upholding deficiency assessments of income taxes.
VANDEVANTER, J., lead opinion
MR. JUSTICE VAN DEVANTER delivered the opinion of the Court.
This is a controversy respecting deficiencies in the petitioner's income taxes for 1922 and 1923.
The question presented is, where all the assets and business of an older corporation are taken over by a new corporation, specially organized for the purpose and having substantially the same capital structure, in exchange for a portion of its stock, which is distributed by the older corporation among the latter's stockholders share for share, thereby retiring the old shares, is the new corporation entitled, notwithstanding the change in corporate identity and ownership, to have its taxable income for the succeeding period computed and determined by deducting from its net income for that period the net losses sustained by the older corporation in the preceding period? The answer involves a construction of § 204(b) of the Revenue Act of 1921, c. 136, 42 Stat. 227, 231, which declares:
If, for any taxable year beginning after December 31, 1920, it appears upon the production of evidence satisfactory to the Commissioner that any taxpayer has sustained a net loss, the amount thereof shall be deducted from the net income of the taxpayer for the succeeding taxable year, and if such net loss is in excess of the net income for such succeeding taxable year, the amount of such excess shall be allowed as a deduction in computing the net income for the next succeeding taxable year; the deduction in all cases to be made under regulations...
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