GREAT LAKES COCA-COLA BOT. CO. v. COMMISSIONER OF IR, 8721.

• Citation: 151 F.2d 174
• Decision Date: 11 December 1945
• Docket Number: No. 8721.,8721.
• Parties: GREAT LAKES COCA-COLA BOTTLING CO. v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Seventh Circuit

151 F.2d 174 (1945)

GREAT LAKES COCA-COLA BOTTLING CO. v. COMMISSIONER OF INTERNAL REVENUE.

No. 8721.

Circuit Court of Appeals, Seventh Circuit.

December 11, 1945.

Frank C. Leslie, of Atlanta, Ga., for petitioner.

Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key, Newton K. Fox, and Hilbert P. Zarky, Dept. of Justice, and J. P. Wenchel, Bureau of Internal Revenue, all of Washington, D. C., for respondent.

Before SPARKS, MAJOR, and KERNER, Circuit Judges.

SPARKS, Circuit Judge.

This proceeding is before us for a second time on petition of the taxpayer for review of a decision of the Tax Court. On an earlier review (7 Cir., 133 F.2d 953), we affirmed the decision of that court denying the taxpayer a credit on its undistributed profits tax claimed by it under § 27 (f) of the Revenue Act of 1936, 26 U.S.C.A. Int.Rev.Acts, page 837, pertaining to distributions in liquidation. Noting, however, that the parties had stipulated, and the court had found as a fact that the taxpayer had suffered an operating loss of $36,988 as of January 1, 1937, and that it had in its original petition for review by the Tax Court claimed a credit under § 26(c) (1) but had abandoned that claim after the decision by the Supreme Court of the cases of Helvering v. Northwest Steel Mills, 311 U.S. 46, 61 S.Ct. 109, 85 L.Ed. 29, and Crane-Johnson Co. v. Helvering, 311 U.S. 54, 61 S.Ct. 114, 85 L.Ed. 35, we remanded the cause to the Tax Court in order to give the taxpayer an opportunity to show whether or not it was entitled to any credit by reason of the retroactively effective amendment of the 1936 Revenue Act by the Act of 1942, 26 U.S.C.A. Int.Rev.Acts permitting relief of deficit corporations under certain circumstances.

The amendment under which leave to seek the relief was granted by us provided for a credit for the corporation having a deficit in accumulated earnings and profits as of the close of the preceding taxable year in the amount of such deficit, if the corporation were prohibited by a provision of a law or of an order of a public regulatory body from paying dividends during the existence of a deficit in accumulated earnings and profits, and if such provision was in effect prior to May 1, 1936. Revenue Act of 1942, Title V, § 501, 26 U.S.C.A. Int.Rev.Acts.

On remand from this court a new stipulation of facts was introduced, and the Tax Court rendered its decision on the basis of the facts therein contained. The taxpayer was incorporated in 1925, under the laws of Delaware, and dissolved in December, 1937. According to its certificate of incorporation the total authorized capital stock was $450,200, represented by 2,750 shares of 7% cumulative A preferred, 1,752 shares of 7% cumulative B preferred, both of the par value of $100, and 50,000 shares of common with no par value. As of January 1, 1936 the taxpayer had a deficit in accumulated earnings and profits for Federal income tax purposes of $71,586.90, and the dividends on both its issues of preferred stock were accumulated in considerable amount. In May 1936, the Articles of Incorporation were amended to provide for an increase of the capital stock to $600,200, by the conversion of its 50,000 shares of no par value common stock to the same number having a par value of one dollar a share, and the issuance of an additional 100,000 shares of the same par value, for such consideration as the Board of Directors should determine. On June 15, 1936, 50,000 shares were offered and sold to the original common stockholders for $15 a share, or a total of $750,000, $50,000 of which the Directors determined to be capital, and $700,000, surplus. The minutes of the meeting of the Board preceding all this action declared that it was the intention to utilize a portion of the proceeds of the sale of the new common in the redemption and retirement of all the preferred stock then outstanding, and to discharge all accumulated dividends up to July 1, 1936. This action was taken on that date, $419,710 being expended for retirement...