California Electric Co. v. United States, 45543.

• Decision Date: 04 December 1944
• Docket Number: No. 45543.,45543.
• Citation: 57 F. Supp. 957
• Parties: CALIFORNIA ELECTRIC CO., Limited, v. UNITED STATES.
• Court: U.S. Claims Court

57 F. Supp. 957

CALIFORNIA ELECTRIC CO., Limited, v.UNITED STATES.

No. 45543.

Court of Claims.

December 4, 1944.

COPYRIGHT MATERIAL OMITTED

Walter G. Moyle, of Washington, D. C. (Ernest H. Oliver, of Washington, D. C., on the brief), for plaintiff.

Daniel F. Hickey, of Washington, D. C., and Samuel O. Clark, Jr., Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyar, both of Washington, D. C., on the brief), for defendant.

Before WHALEY, Chief Justice, LITTLETON, WHITAKER, and MADDEN, Judges, and BOOTH, Chief Justice(retired), recalled.

LITTLETON, Judge.

Plaintiff insists that it was not subject to assessment for any of the tax in question under section 800, Schedule A(3), Revenue Act of 1926, as amended bysection 723 of the Revenue Act of 1932, 26 U.S.C.A.Int. Rev.Acts; that these sections do not impose a tax upon other than sales or transfers of legal title to shares of stock, and claims that none of the deliveries or transfers described in the findings, and summarized in finding 20, were taxable sales or transfers of legal title, except the endorsement and delivery of certificate No. 42 by Mrs. Morello to Bronson, finding 17.As to the two last-mentioned transfers, plaintiff insists that it was not liable for the tax and that such transfers were taxable to Bronson or to Mrs. Morello and Kuehn.

Section 800 of Title VIII of the Revenue Act of 1926, 44 Stat. 9,26 U.S.C.A. Int.Rev.Acts, is as follows:

"On and after the expiration of thirty days after the enactment of this Act there shall be levied, collected, and paid, for and in respect of the several bonds, debentures, or certificates of stock and of indebtedness, and other documents, instruments, matters, and things mentioned and described in Schedule A of this title, or for or in respect of the vellum, parchment, or paper upon which such instruments, matters, or things, or any of them, are written or printed, by any person who makes, signs, issues, sells, removes, consigns, or ships the same, or for whose use or benefit the same are made, signed, issued, sold, removed, consigned, or shipped, the several taxes specified in such schedule.The taxes imposed by this section shall, in the case of any article upon which a corresponding stamp tax is now imposed by law, be in lieu of such tax."Italics supplied.

The pertinent portion of Schedule A(3) of the Revenue Act of 1926as amended bySection 723 of the Revenue Act of 1932, 47 Stat. 169, reads as follows:

"Capital stock (and similar interests), sales or transfers: On all sales, or agreements to sell, or memoranda of sales or deliveries of, or transfers of legal title to any of the shares or certificates mentioned or described in subdivision 2, or to rights to subscribe for or to receive such shares or certificates, whether made upon or shown by the books of the corporation or other organization, or by any assignment in blank, or by any delivery, or by any paper or agreement or memorandum or other evidence of transfer or sale (whether entitling the holder in any manner to the benefit of such share, certificates, interest, or rights, or not), on each $100 of par or face value or fraction thereof of the certificates of such corporation or other organization (or of the shares where no certificates were issued), 4 cents, and where such shares or certificates are without par or face value, the tax shall be 4 cents on the transfer or sale or agreement to sell on each share (corporate share, or investment trust or other organization share, as the case may be): * * *."Italics supplied.

It will be seen that section 800 imposes the tax specified in Schedule A for and in respect of certificates of stock and other documents, and for and in respect of other matters and things mentioned in the schedule, and provides that such tax is to be paid by any person who makes, signs, issues or sells certificates of stock, or for whose use or benefit certificates of stock are made, signed, issued, or sold.Schedule A provides, among other things, that sales or deliveries of or transfers of legal title of shares or certificates of stock, or to rights to subscribe for or to receive such shares or certificates, shall be taxed at 4 cents a share where the shares are without par value, as is the case here.

Prior to October 17, 1932, Rice, Bronson, and Morello deposited a total of 27,000 shares of plaintiff's stock with the Bank of America National Trust and Savings Association(finding 3).November 29they, respectively, endorsed the certificates to the bank as trustee under a Trust Agreement.By these transfers the bank acquired the legal title theretofore vested in the transferors.On the same day the bank presented the certificates for the 27,000 shares to plaintiff and caused to be issued to it and registered in its name, as trustee, certificate Nos. 39, 40, and 41 for a like number of shares (finding 7).It is immaterial that there was no sale.It is also immaterial that under the details of the Trust Agreement the transferors retained equitable ownership of the stock.Founders General Corp. v. Hoey, 300 U.S. 268, 274, 57 S.Ct. 457, 81 L.Ed. 639;Franklin Life Insurance Co. v. United States, 93 Ct.Cl. 259, 266, 37 F.Supp. 155.The tax of $360 on each of these transfers, totaling $1,080, was therefore properly assessed and collected.

It follows from what has been said above that there was a transfer of legal title when the bank, on August 14, 1935, transferred the stock back to Mrs. Rice, Bronson and Morello (finding 8) pursuant to the agreement revoking the trust.Art. 34,Regs. 71(1932 ed.) provides that: "The following are examples of transactions subject to tax: * * * (b) The transfer of stock to or by trustees. * * *."These transfers were therefore taxable under the statute.By the revocation agreement Mrs. Rice transferred to plaintiff her "right to receive" from the bank the certificate, No. 39, which plaintiff had issued to the bank in lieu of the original certificate transferred to the bank by her husband.The transfer of this right to receive was taxable.Raybestos-Manhattan, Inc., v. United States, 296 U.S. 60, 63, 64, 56 S.Ct. 63, 80 L.Ed. 44, 102 A.L.R. 111.This was not a "surrender of stock for extinguishment" within the meaning of art. 35(f) of Regulations 71.No tax was paid by Mrs. Rice, Bronson and Morello on these retransfers by the bank, and a stamp tax in the further sum of $1,080 was assessed against plaintiff.

The next question is whether the tax, penalty, and interest were properly assessed against plaintiff, whose stock is involved in the transfers in question, and whether it is legally liable under section 800, Schedule A(3), for the amounts so assessed.

The facts...