Lembcke v. Commissioner of Internal Revenue, 125.
| Citation | 126 F.2d 940 |
| Decision Date | 04 April 1942 |
| Docket Number | No. 125.,125. |
| Parties | LEMBCKE v. COMMISSIONER OF INTERNAL REVENUE. |
| Court | U.S. Court of Appeals — Second Circuit |
Albert E. James, of Washington, D. C., for petitioner.
Samuel O. Clark, Jr., Asst. Atty. Gen., and J. Louis Monarch, Gerald L. Wallace, and S. Dee Hanson, Sp. Assts. to the Atty. Gen., for respondent.
Before L. HAND, SWAN, and CHASE, Circuit Judges.
The deficiency in dispute arose from the Commissioner's treating as income for the year 1936 the full amount of a dividend declared and paid in that year upon the taxpayer's six per cent. cumulative preferred stock of Wood Preserving Corporation. Only part of such dividend was actually paid to the taxpayer, the remaining portion having been paid at his direction to Koppers Company as reimbursement for sums previously received by him from Koppers Company or its predecessor in interest, American Tar Products, under a contract for the purchase of his Wood Corporation stock. It is the taxpayer's contention that so much of the dividend as was paid direct to Koppers Company should not be included in his gross income for the year 1936.
The case was tried upon stipulated facts. In 1933 the Tar company modified a prior contract made with the taxpayer and other owners of Wood preferred to provide for the purchase of their shares over a term of years. The 1933 contract provided in paragraph 2 that if the Wood company should fail to pay semi-annual dividends of 75 cents per share in each of the years 1933 to 1937 inclusive, the Tar company would make up the difference, but should be entitled to reimbursement of the amounts so paid "if, as and when dividends in excess of $1.50 per share in any one year shall be declared by the Wood Preserving Corporation, and the stockholders direct the Wood Preserving Corporation to make such payments." The purchase price to be paid for the stock was "par plus accrued dividends, with proper credits for any sum of money advanced by Tar Company under the provisions of Paragraph 2 for which it shall not have been reimbursed as hereinabove provided." Pursuant to the terms of the agreement the Tar company or its successor in interest, Koppers Company, paid the taxpayer 75 cents per share on June 30, 1933, and semi-annually thereafter up to and including June 30, 1936. The amounts so received in each year were included as income in the taxpayer's return for such year. The Wood company declared no dividends until December, 1936, when it declared a cash dividend of $6 per share upon its preferred stock to "be applied against the accrued dividends due thereon." After the declaration of this dividend and prior to the date of payment, December 21, 1936, the taxpayer instructed the Wood company to pay $30,922.50 thereof to Koppers Company, and this was done. His return for 1936 reported as income $4,417.50, representing the payment made by Koppers...
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Ross v. Commissioner of Internal Revenue
...1 Cir., 1941, 124 F.2d 110. And the Second Circuit has rejected it repeatedly. Bennet v. Helvering, supra; Lembcke v. Commissioner, 2 Cir., 1942, 126 F.2d 940; Schmidlapp v. Commissioner, 2 Cir., 1938, 96 F.2d 680, 118 A.L.R. 297; Bigelow v. Bowers, 2 Cir., 1934, 68 F.2d 839, certiorari den......
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