Crocker v. Comm'r of Corps. & Taxation

• Decision Date: 14 September 1932
• Citation: 182 N.E. 300,280 Mass. 238
• Parties: CROCKER v. COMMISSIONER OF CORPORATIONS AND TAXATION.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

280 Mass. 238

182 N.E. 300

CROCKER

v.COMMISSIONER OF CORPORATIONS AND TAXATION.

Supreme Judicial Court of Massachusetts, Suffolk.

Sept. 14, 1932.

Appeal from Board of Tax Appeals.

The Commissioner of Corporations and Taxation refused an abatement of the income tax assessed upon Kendall F. Crocker for 1930, and from a decision of the Board of Tax Appeals sustaining the commissioner's action, the taxpayer appeals.

Petition dismissed.George H. B. Green, Jr., and David Burstein, both of Boston, for appellant.

Joseph E. Warner, Atty. Gen., and Roger Clapp, Asst. Atty. Gen., for appellee.

RUGG, C. J.

This is an appeal from a decision of the Board of Tax Appeals sustaining the action of the Commissioner of Corporations and Taxation in refusing an abatement of the income tax assessed upon the appellant for 1930 based upon his income for 1929. The material facts are these: The appellant was the owner of six hundred and fifty-nine shares of stock in a corporation. Of these, seventy-nine and thirteen-twentieths shares were purchased during the years 1919 to 1928, inclusive, and the remainder, five hundred and seventy-nine and seven-twentieths shares, were received as stock dividends during the same period. The cost of the shares purchased was $11,940.50, and the value when acquired of the shares acquired as stock dividends was $40,114.73, a total of $52,055.23. The price paid to the appellant for three hundred shares sold by him on October 18, 1929, was $39,063. The commissioner, by apportioning the cost of the seventy-nine and thirteen-twentieths shares purchased over the entire six hundred and fifty-nine shares, determined the cost of the three hundred shares to be $5,267.30. Thus the gain was found to be $33,795.70, on which the income tax on excess of gains over losses was assessed. The appellant also owned three hundred and twenty-four shares of stock in another corporation, of which one hundred and eighty-three and twelve-twentieths shares were purchased during the period from 1916 to April 1, 1929, and one hundred and forty and eight-twentieths shares were received as stock dividends during the same period. The cost of the shares purchased was $12,273 58 and the value when received of the shares acquired as stock dividends was $7,293.50, a total of $19,567.08. The price paid to the appellant for two hundred shares sold in October, 1929, was $25,342. The commissioner, by apportioning the cost of the shares purchased over the entire three hundred and twenty-four shares, determined the cost of the two hundred shares to be $7,576.28. Thus the gain was found to be $17,765.72, on which the income tax on excess of gains over losses was assessed. The commissioner paid no attention to the value of the shares received as stock dividends when received, but made his calculation of the cost of the shares owned at the time of sale by dividing the cost of the shares purchased by the total number of shares owned and subtracted the cost thus computed from the sale price of the shares sold. The appellant contends that the gain for purposes of the income tax ought to be determined (1) by apportioning the sum of the cost of the shares purchased and the value at the time of the receipt of the shares received by way of stock dividend over the total number of shares owned, (2) by taking as the cost of the shares sold a proportionate amount of this total and (3) by subtracting the cost thus computed from the sale price of the shares sold. The determination of the question thus presented depends upon the construction of the governing statute. Its material words are in G. L. c. 62, § 5 (c), as most recently amended by St. 1928, c. 217, § 1 (see now St. 1931, c. 435, § 1): ‘The excess of the gains over the losses received by the taxpayer from purchases or sales of intangible personal property, whether or not said taxpayer is engaged in the business of dealing in such property, shall be taxed at the rate of three per cent per annum. When shares of new stock of the company issuing the same received as a stock dividend or shares of stock which were the basis of such stock dividend are sold, the basis of determination of the gain or loss shall be the cost, or value when acquired otherwise than by purchase, of the stock which was the basis of such stock dividend, apportioned over the old and new shares of such company held after the receipt of such stock dividend.’ It is further provided in said chapter 217 by section 2 that ‘in determining gains or losses realized from sale of capital assets, the basis of determination, in case of property owned on January first, nineteen hundred and sixteen, shall be the value on that date, and in case of property acquired by purchase thereafter, the cost thereof, * * *’ and by section 3 that the act shall apply to income received during the calendar year nineteen hundred and twenty-eight and thereafter. Said section 2 amended G. L. c. 62, § 7, by striking out in its last line the words ‘thereafter, the value on the date when it is acquired’ and inserting in place thereof the words ‘by purchase thereafter, the cost thereof.’ See now St. 1931, c. 435, § 2.

We think that the words of said section 5 (c) as amended by St. 1928, c. 217, § 1, are too plain to require extended discussion. The legislative mandate is clear to the effect that in calculating the kind of income accruing to the taxpayer from the excess of gains over losses in purchases and sales of intangible personal property, when some shares of stock in a corporation have been bought or acquired otherwise than by purchase as matter of original ownership, and some other shares of the same stock have been...