Everett v. United States, 313-70.
| Decision Date | 13 September 1971 |
| Docket Number | No. 313-70.,313-70. |
| Parties | Anna M. EVERETT et al., Appellees, v. UNITED STATES of America, Appellant. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Gerald W. Dykes, Kansas City, Kan., (Ervin G. Johnston and Weeks, Thomas, Lysaught, Bingham & Johnston, Kansas City, Kan., of counsel, on the brief), for appellees.
Daniel B. Rosenbaum, Atty., Department of Justice (Johnnie M. Walters, Asst. Atty. Gen., Meyer Rothwacks and Harry Baum, Attys., Department of Justice, and Robert J. Roth, U. S. Atty., of counsel, on the brief), for appellant.
Before CLARK*, Associate Justice, and HILL and McWILLIAMS, Circuit Judges.
This is a tax refund case. Specifically, plaintiffs, who were transferee shareholders of Bonner Springs Building and Loan Association (Bonner), made claim in the United States District Court for the State of Kansas to recover $20,362.82, which sum, according to the complaint, was erroneously and illegally assessed against and collected from the plaintiffs as income tax owed by Bonner for the calendar year 1962. After the Government filed its answer, both parties filed motions for summary judgment, each alleging that under the pleadings and the elaborate pretrial order there existed no genuine issue as to any material fact. Upon hearing, the trial court granted the plaintiffs' motion and entered judgment in their favor. The Government now appeals. We affirm.
Both the plaintiffs and the Government agree that the broad issue to be resolved is whether the trial court erred in its determination that the transfer by a state chartered building and loan association of its assets and liabilities to a federal savings and loan association constituted a so-called tax-free "reorganization" as defined in § 368(a) (1) (C) and (2) (B) of the Internal Revenue Code of 1954, and that Bonner was therefor not required to restore the balance in its bad debt reserve to gross income for its final taxable year, i. e., 1962. The parties generally agree further that resolution of this broad question turns on the disposition of two corollary issues: (1) Did the trial court err in holding that the full paid shares and savings shares of the federally chartered savings and loan association constituted "voting stock" within the meaning of the aforesaid § 368(a) (1) (C) and (2) (B); and (2) did the trial court err in its further holding that the transaction under consideration satisfied the "continuity of interest" requirement for a "C" type reorganization?
The Bonner Springs Building and Loan Association was a state chartered building and loan association with the several plaintiffs being the permanent shareholders therein. Bonner was organized under Kansas statutes which authorized permanent shares in a building and loan association in addition to full paid shares and savings shares. On August 23, 1962, pursuant to prior approval of its directors and shareholders, Bonner entered into an agreement with Inter-State Federal Savings and Loan Association (Inter-State), a savings and loan association chartered under 12 U.S. C. § 1461 et seq., whereby Inter-State acquired all the assets of Bonner under the following conditions: (1) Borrowing members of Bonner became borrowing members of Inter-State; (2) holders of full paid shares and savings shares in Bonner received for their shares like shares in Inter-State equal in value to the full participation value of their shares in Bonner; (3) Inter-State paid Bonner the sum of $65,000 in cash; and (4) Inter-State assumed all liabilities of Bonner, excluding any federal or state tax liability arising in connection with the transaction.
After the aforesaid agreement was executed on August 27, 1962, Inter-State continued to carry on the business theretofore carried on by Bonner at the same location. Thereafter Bonner was liquidated and dissolved, with the $65,000 received by Bonner from Inter-State being distributed to the several plaintiffs, who as indicated were the permanent shareholders of Bonner.
It is noted that the holders of full paid shares and savings shares in Bonner comprised over 97% of the voting shares in Bonner and that their holdings constituted about 83% of the fair market value of Bonner's assets. As above mentioned, these holders received for their shares in Bonner like shares in Inter-State to the full participation value of their shares in Bonner.
The initial question is whether the full paid shares and savings shares of Inter-State constitute "voting stock" of Inter-State within the meaning of § 368(a) (1) (C) and (2) (B) of the Internal Revenue Code of 1954. The answer to this question depends upon the nature of the interest represented by the said full...
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