Steubenville Bridge Co. v. Comm'r of Internal Revenue
| Decision Date | 08 November 1948 |
| Docket Number | Docket Nos. 9208-9212,12265.,12250,12231-12232,12183-12184,12253-12262,12120-12121,12192-12195 |
| Citation | 11 T.C. 789 |
| Parties | THE STEUBENVILLE BRIDGE COMPANY, A DISSOLVED CORPORATION, PETITIONER, ET AL., 1 v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Corporate stockholders gave options on their corporate stock to a syndicate, at varying prices and as a result of individual contracts. No member of the syndicate owned any stock in the corporation when the options were obtained. In the options the stockholders reserved no control over the syndicate activities in their disposition of the options or their efforts to sell the corporate stock or physical assets. The syndicate contracted to sell the corporate assets to the State of West Virginia. Thereafter it exercised its options and purchased all the corporate stock. New officers and directors were elected, appropriate steps were taken to liquidate the corporate assets in kind to a syndicate member who had procured all the stock, and thereafter the corporation was dissolved. The syndicate member transferred the assets received by him in liquidation to West Virginia in compliance with the prior contract. Held, the sale to West Virginia was not made by the corporation and the corporation was not subject to a tax on the capital gain involved. P. G. Rodewald, Esq., Chesney M. Carney, Esq., John D. Ray, Esq., J. M. Reed, Esq., Sidney Gambill, Esq., L. Weinberger, Esq., Elmer E. Myers, Esq., William Wallace Booth, Esq., and Wm. P. Nottingham, Esq., for the petitioners.
Stanley L. Drexler, Esq., for the respondent.
These proceedings, which were all consolidated for hearing and opinion, involve a deficiency in income and declared value excess profits taxes of the Steubenville Bridge Co., Docket No. 9212, determined for the year 1941 in the amount of $367,424.16, as follows:
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¦Tax ¦Liability ¦Assessed ¦Overassessment¦Deficiency ¦
+---------------------------+-----------+----------+--------------+-----------¦
¦Income tax ¦$291,687.62¦$38,962.67¦None ¦$252,724.95¦
+---------------------------+-----------+----------+--------------+-----------¦
¦Declared value excess ¦114,699.21 ¦None ¦None ¦114,699.21 ¦
¦profits tax ¦ ¦ ¦ ¦ ¦
+---------------------------+-----------+----------+--------------+-----------¦
¦Excess profits tax ¦None ¦8,794.71 ¦$8,794.71 ¦None ¦
+---------------------------+-----------+----------+--------------+-----------¦
¦Total ¦406,386.83 ¦47,757.38 ¦8,794.71 ¦367,424.16 ¦
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As to all petitioners except the Steubenville Bridge Co., the Commissioner has determined a transferee liability to exist in the alternative as against either one of two groups, the first group being petitioners herein in dockets number 9208 to 9211, inclusive, as follows:
FN* After hearing in this proceeding Samuel Biern died, and upon motion his estate was substituted for him as petitioner in Docket No. 9209.
These petitioners were members of a syndicate which procured assets from the Steubenville Bridge Co. in liquidation. The other group, consisting of the petitioners in the remaining dockets, are either stockholders in Steubenville Bridge Co., as follows:
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¦Petitioner ¦Docket No. ¦
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¦Robert McE. Wright ¦12184 ¦
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¦Estate of Samuel H. Putnam, deceased, Samuel H. Putnam, Jr., ¦12192 ¦
¦executor ¦ ¦
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¦P. Emery Huth ¦12253 ¦
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¦Joseph G. Huth ¦12254 ¦
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¦Charles Conway McDonald ¦12255 ¦
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¦Henry C. Camp ¦12256 ¦
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¦Charles A. Camp ¦12257 ¦
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¦Glenn C. Camp ¦12258 ¦
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¦J. Gordon Camp ¦12259 ¦
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¦Marguerite M. Yost ¦12260 ¦
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¦Walter M. Yost ¦12261 ¦
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¦Estate of Tillie E. Camp, deceased, Charles A. Camp, executor ¦12262 ¦
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¦West Penn Railways Co ¦12265 ¦
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or holders of certificates of equitable interest in stock of the Steubenville Bridge Co., as follows:
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¦Petitioner ¦Docket No. ¦
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¦J. Nesbit McDonald ¦12120 ¦
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¦Edward McDonald ¦12121 ¦
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¦Robert McE. Wright ¦12183 ¦
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¦Samuel H. Putnam, Jr., executor of the estate of Samuel H. ¦ ¦
¦Putnam ¦ ¦
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¦(deceased) ¦12193 ¦
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¦Citizens National Bank of Washington, successor trustee to ¦ ¦
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¦Sydney B. Donnan, surviving trustee U-A of John W. Donnan, ¦ ¦
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¦DTD, 1911 and amended 1918 ¦12194 ¦
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¦Samuel H. Putnam, Jr ¦12195 ¦
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¦Florence C. Beatty ¦12231 ¦
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¦Emma B. Woodhull ¦12232 ¦
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¦American Water Works & Electric Co ¦12250 ¦
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The petitioners in this group sold their stock to the aforesaid syndicate prior to the distribution in liquidation.
The question presented is as to whether a series of acts performed by stockholders of the Steubenville Bridge Co. prior to the sale of all of the stock of the Steubenville Bridge Co. to a syndicate and the immediate liquidation of the company, with the distribution of its assets in liquidation to a syndicate member who then sold the assets to the State of West Virginia, constituted a sale of those assets to West Virginia by the Steubenville Bridge Co.
If this question is answered in the affirmative, the secondary questions are:
(1) Did Steubenville Bridge Co. realize a profit from the sale and, if so, how much?
(2) Did the former stockholders of the Steubenville Bridge Co. incur transferee liability when they sold their stock prior to the dissolution and liquidation of the company?
(3) In the alternative, did the members of the syndicate, who...
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