Helvering v. Watts Same v. Sicard Same v. Sloane
| Decision Date | 16 December 1935 |
| Docket Number | 185,186,Nos. 184,s. 184 |
| Parties | HELVERING, Commissioner of Internal Revenue, v. WATTS. SAME v. SICARD. SAME v. SLOANE |
| Court | U.S. Supreme Court |
The Attorney General, and Mr. J. Louis Monarch, of Washington, D.C., for p titioner.
Mr. Samuel Seabury, of New York City, for respondents.
These causes involved deficiency assessments for income tax against the three respondents for the year 1924.
They were the sole stockholders of United States Ferro Alloys Corporation, herein Ferro Alloys, and the causes, alike in all essential particulars, were dealt with below in one opinion.
The respondents maintain that they exchanged all stock of Ferro Alloys for shares of Vanadium Corporation of America and bonds of Ferro Alloys guaranteed by Vanadium; that these two corporations were parties to a reorganization, and that under section 203(b)(2), Revenue Act 1924, 43 Stat. 256 (26 U.S.C.A. § 112 note), no taxable gain resulted. The Commissioner insists that the transaction was a sale of all the stock of the Ferro Alloys, and therefore taxable gain resulted. The applicable statutory provision is section 203, Revenue Act 1924, the pertinent parts of which are in the margin of the opinion in Helvering v. Minnesota Tea Co., 296 U.S. 378, 56 S.Ct. 269, 80 L.Ed. 284.
In December, 1924, respondents owned all the stock of Ferro Alloys Corporation. They exchanged this with the Vanadium Corporation for stock of the latter valued at $30 per share and for $1,161,184.50 mortgage bonds of Ferro Alloys guaranteed by Vanadium. Ferro Alloys continued to conduct business until its dissolution in 1928. Article 1574 of Treasury Regulations 65 provided that under the Act of 1924 no gain or loss shall be recognized to the shareholders from the exchange of stock made in connection with the reorganization, if two or more corporations reorganize; for example, by either the sale of the stock of B to A, or the acquisition by A of a majority of the total number of shares of all other classes of stock of B.
The transaction here involved is within the description of reorganization recognized by the Treasury Regulation above quoted. And if the regulation can be taken as properly interpreting the statute, the challenged judgment must be affirmed.
The court below recites the history of the Treasury Regulation above quoted, and concludes that, in view of the re-enactment of the paragraph...
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