Henrietta Mills v. Commissioner of Internal Revenue

• Citation: 52 F.2d 931
• Decision Date: 12 October 1931
• Docket Number: No. 3165.,3165.
• Parties: HENRIETTA MILLS, Inc., v. COMMISSIONER OF INTERNAL REVENUE.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

52 F.2d 931 (1931)

HENRIETTA MILLS, Inc., v. COMMISSIONER OF INTERNAL REVENUE.

No. 3165.

Circuit Court of Appeals, Fourth Circuit.

October 12, 1931.

Leon F. Cooper and Glessner, Neuland & Cooper, all of Washington, D. C., for petitioner.

Randolph C. Shaw, Sp. Asst. to Atty. Gen. (G. A. Youngquist, Asst. Atty. Gen., Sewall Key and John G. Remey, Sp. Assts. to Atty. Gen., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and William E. Davis, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., on the brief), for respondent.

Before PARKER, NORTHCOTT, and SOPER, Circuit Judges.

NORTHCOTT, Circuit Judge.

This case involves income taxes for the fiscal year ending March 31, 1923, in the sum of $35,112.53. The appeal is taken from decision (order of redetermination) of the United States Board of Tax Appeals entered September 13, 1930, reported in 20 B. T. A. 651.

The facts were stipulated and are as follows:

Petitioner is a corporation organized under the laws of North Carolina, with its principal office at Caroleen. It kept its books of account and rendered its federal income-tax returns on the accrual basis of accounting.

On March 16, 1920, J. C. Plonk, R. P. Roberts, J. A. Carroll, and petitioner, as parties of the first part; together with W. S. Forbes and E. B. Springs, parties of the second part; and John M. Miller, Jr., as party of the third part, entered into a written contract, the material parts of which read:

"The parties of the first part on behalf of themselves and others, for and in consideration of the sum of Ten ($10) Dollars, cash in hand to them paid by the parties of the second part, receipt whereof is hereby acknowledged, agree to sell to the parties of the second part, who hereby agree to buy, subject to the terms and conditions hereinafter set forth, Twenty-Five (25%) per cent. of a majority of all of the outstanding stock of the Cherokee Falls Manufacturing Company, of Cherokee Falls, South Carolina, together with an option to purchase the remaining Seventy-Five (75%) per cent. of said majority of said stock as follows:

"1. The parties of the first part agree to deposit with the said party of the third part, on or before the 1st day of April, 1920, Fifty-One (51%) per cent. or more of the entire outstanding Capital Stock of the said Cherokee Falls Manufacturing Company, with the privilege of depositing for their own account, or for the account of others, with the said party of the third part, on or before the 1st day of July, 1920, any or all of the remaining outstanding Capital Stock of the said Cherokee Falls Manufacturing Company, and the said parties of the second part agree to buy outright Twenty-Five (25%) per cent. of all of the stock of the said Company so deposited with the said party of the third part together with an option to buy the remaining Seventy-Five (75%) per cent. of said stock, and to pay for said option and said Twenty-Five (25%) per cent. of said stock an amount equal to Six Hundred and Fifty ($650) Dollars per share, to be paid to the party of the third part not later than April 10, 1920, for each share of said Twenty-Five (25%) per cent. of the majority of said stock deposited with the said party of the third part on or before April 1, 1920, and with respect to said additional stock deposited with the said party of the third part after April 1st, 1920, and on or before July 1st, 1920, the payment of Six Hundred and Fifty ($650) Dollars a share therefor shall be made to the said party of the third part within Ten (10) days from the date that he shall tender to the parties of the second part any part of said additional stock but settlement for the full Twenty-Five (25%) per cent. of such additional stock shall be made by the parties of the second part not later than July 10th, 1920; and the said option purchased being as follows:

"(a) An option to purchase on January 15th, 1921, an additional Twenty-Five (25%) per cent. of all of said stock deposited with the party of the third part up to and including July 1st, 1920, upon paying therefor to the party of the third part on the said 15th day of January, 1921, the sum of Six Hundred and Eighty and 87½/100 ($680.87½) Dollars, per share; (b) An option to purchase on January 15th, 1922, an additional Twenty-Five (25%) per cent. of all of said stock so deposited, upon paying therefor to the party of the third part on said 15th day of January, 1922, the sum of Seven Hundred and Nineteen and 87½ ($719.87½) Dollars, per share; and (c) An option to purchase on January 15th, 1923, the remaining Twenty-Five (25%) per cent. of all of said stock so deposited, upon paying therefor to the said party of the third part on said 15th day of January, 1923, the sum of Seven Hundred and Fifty-Eight & 87½ ($758.87½) Dollars, per share.

"2. It is understood and agreed that the parties of the first part will have all of the stock deposited with the party of the third part under this agreement, indorsed, assigned, and transferred on the books of the Cherokee Falls Manufacturing Company in such manner as the party of the third part shall direct; that the entire Twenty-Five (25%) per cent. of said stock first purchased by the parties of the second part as hereinbefore set forth, shall within a reasonable time after the date of such purchase, be properly transferred on the books of the Cherokee Falls Manufacturing Company to the parties of the second part, who shall at once assign the same in blank and deliver the same to the party of the third part, who shall hold the same until all provisions of this contract shall have been carried out, or the contract otherwise terminated; and likewise as each option is taken up by the parties of the second part, and the stock optioned thereunder is paid for in full as herein provided, such stock shall be promptly transferred on the books of the Cherokee Falls Manufacturing Company to the parties of the second part, who shall at once assign the same in blank, and deliver the same to the said party of the third part, to be by him held until all the provisions of this contract shall have been carried out, or the contract otherwise terminated; and when all of the provisions of this contract shall have been carried out, the said party of the third part shall then deliver all of said stock to the parties of the second part.

"But in event the parties of the second part shall fail to take up any part of the said option as hereinbefore provided, or shall fail to pay to the said party of the third part within thirty (30) days from the date such option should have been taken up, the full amount of purchase money required to be paid for the stock optioned to be purchased on such date, the said party of the third part is hereby authorized, empowered, and directed, at the expiration of said Thirty (30)...