Olvey v. Collector of Revenue, 43531

• Decision Date: 12 November 1957
• Docket Number: No. 43531,43531
• Citation: 233 La. 985,99 So.2d 317
• Parties: Mr. John W. and Mrs. Eula D. OLVEY v. COLLECTOR OF REVENUE.
• Court: Louisiana Supreme Court

Page 317

99 So.2d 317

233 La. 985

Mr. John W. and Mrs. Eula D. OLVEY v. COLLECTOR OF REVENUE.

No. 43531.

Supreme Court of Louisiana.

Nov. 12, 1957.

Rehearing Denied Jan. 9, 1958.

H. M. Holder, Shreveport, for plaintiffs-appellants.

Chapman L. Sanford, Levi A. Himes, Robert L. Roland, Baton Rouge, for appellee.

PONDER, Justice.

Plaintiffs have appealed from the judgment of the district court which affirmed an assessment, made by the Collector of Revenue against plaintiffs for income taxes for the year 1952, on income derived from the sale of certain stocks.

Mr. and Mrs. Olvey owned a number of shares of stock in Gregg-Tex Gasoline Corporation, a corporation organized under the laws of the State of Delaware and doing business in the State of Texas. At the time of the purchase of this stock (in 1932 or 1933), the plaintiffs were non-residents of the State of Louisiana. In June of 1937, the plaintiffs moved to Shreveport, Louisiana and have continued to reside there ever since that date. The stock in question was sold in 1952. In arriving at the net gain, the Collector took the value of the stock as of January 1, 1934, the date the Louisiana income tax law became effective.

The plaintiffs contend that the lower court erred in affirming the assessment made by the Collector of Revenue in fixing the net gain on the basis of the value of the stock on January 1, 1934 and that the net gain should have been determined on the basis of the value of the stock as of June, 1937, when the plaintiffs moved into the State of Louisiana. They take the position that the fixing of the value of the stock as of January 1, 1934 in determining the income due from the stock is violative of Article 10, Section 1 of our Constitution, LSA, which only authorizes a tax on net income; and that it would also be violative of the Fourteenth Amendment of the Federal Constitution because it gives extra territorial effect to the laws of this State and at the same time does not give full faith and credit to the laws of the state from which plaintiffs moved to the State of Louisiana.

It is argued that Article 10, Section 1 of our Constitution, only allows a tax on net income and necessarily prevents and precludes a tax on capital. The position is taken that the effect of the Collector's assessment is to give the tax extra territorial effect and to, in fact, tax capital. In support of their contention, the plaintiffs rely on the cases of Lynch v. Turrish, 247 U.S. 221, 38 S.Ct. 537, 62 L.Ed. 1087 and Marsman v. Commissioner of Internal Revenue, 4 Cir., 205 F.2d 335.

In the Lynch case the government sought to tax certain stock by taking the value prior to 1913 (the date the Federal Act went into effect) in comparison to the value of stock in 1914 when it was sold (during liquidation proceedings). The facts show that in 1914 when the stock was disposed of it was worth twice the value it had previous to 1913 but that there had been no increase between 1913 and 1914. The court held that the value in 1913 (when the law became effective) must be taken and hence there was no tax due. The Lynch case merely holds that assets cannot be taxed on the value prior to the enactment of the 1913 Act, 38 Stat. 166. What is sought to be done here is exactly that--the Collector is not seeking to tax the stock prior to 1934 although it was purchased in 1932 or 1933.

In the Marsman case the government sought to tax a resident of the Philippines on certain undistributed net income held on December 31, 1940 by La Trafagona, a Philippine corporation wholly owned by Mrs. Marsman. The questions presented for decision were: (1) whether the tax should be based on the entire amount of the undistributed income of La Trafagona on December 31, 1940, or only so much thereof as was acquired after September 22, 1940, when she became a resident of the United States; and (2) whether the taxpayer, being on a cash basis, is entitled to a credit against her United States income tax for 1941 in the amount of the income taxes paid by her to the Philippine Islands in 1941 for the years 1938 and 1940. The court held that Mrs. Marsman was to pay tax only on so much thereof as was acquired after September 22, 1940 when she became a resident of the United States and she was to be given credit for income taxes paid by...