v. United States
| Citation | 56 S.Ct. 63,80 L.Ed. 44,102 A.L.R. 111,296 U.S. 60 |
| Decision Date | 11 November 1935 |
| Docket Number | RAYBESTOS-MANHATTA,No. 20,I,20 |
| Parties | nc., v. UNITED STATES |
| Court | U.S. Supreme Court |
Messrs. Charles H. Le Fevre and Howard S. Le Roy, both of Washington, D.C., for petitioner.
Messrs. Homer S. Cummings, Atty. Gen., and A. F. Prescott, of Washington, D.C., for the United States.
In this case we granted certiorari, 295 U.S. 727, 55 S.Ct. 833, 79 L.Ed. 1678, to review a judgment of the Court of Claims to settle a doubtful point of federal law, of importance in the administration of the revenue acts, and to resolve a conflict of the decision below with that of the Court of Appeals for the Third Circuit in MacLaughlin v. Westmoreland Coal Co., 73 F.(2d) 1004, affirming (D.C.) 8 F.Supp. 963, on opinion below.
The question presented is whether the issue by petitioner of its shares of stock to the stockholders of two other corporations in exchange for the assets of those corporations, pursuant to a plan for their consolidation, involved a 'transfer' taxed by section 800, Schedule (A)(3), title 8 of the Revenue Act of 1926, 44 Stat. 9, 99, 101 (see 26 USCA §§ 900, 902(b), 921(b)(1). The Court of Claims held that it did, and denied recovery of the tax, which petitioner had paid under protest. 10 F.Supp. 130.
Section 800, Schedule (A)(2) of the 1926 Act (see 26 USCA §§ 900, 902(a), imposes a stamp tax at a specified rate on the original issue of shares of corporate stock. By section 800, Schedule (A)(3), a like tax is laid 'on all sales, or agreements to sell, or memoranda of sales or deliveries of, or transfers of legal title to shares or certificates of stock or * * * of interest in property * * * in any corporation, or to rights to subscribe for or to receive such shares or certificates, whether made upon or shown by the books of the corporation * * * or by any paper or agreement or memorandum or other evidence of transfer of sale.' Section 800 imposes liability for the tax upon the transferor, the transferee and the corporation whose stock is transferred.
Petitioner was organized under the laws of New Jersey as a step in carrying out a plan and agreement for the consolidation of three other corporations. Two of the corporations conveyed their property to petitioner in return for a specified number of its shares of capital stock, issued not to the two corporations, but directly to their stockholders in proportion to their holdings. The government and the taxpayer are not in accord as to the precise interpretation to be placed upon the contracts which resulted in the consolidation, but accepting the taxpayer's contention for purposes of decision, we assume that it was agreed by all concerned that the shares of petitioner were to be issued directly to the stockholders of the two corporations without further intervention by the latter.
Liability for the tax levied on the original issue of stock is conceded but it is denied that the transaction involved any taxable transfer within the purview of Schedule (A)(3). It is said that the petitioner was subject to the tax imposed by this schedule only if there was a transfer of the right to receive the stock to be issued by petitioner for the assets of the two corporations; that as neither of them was entitled, under the agreement, to receive the certificates for the newly issued shares, which were to be issued directly to their stockholders, neither corporation can be said to have transferred rights to receive stock. We think the statute is not to be read so narrowly.
The stock transfer tax is a revenue measure exclusively. Its language discloses the general purpose to tax every transaction whereby the right to be or become a shareholder of a corporation or to receive any certificate of any interest in its property is surrendered by one and vested in another. See Provost v. United States, 269 U.S. 443, 458, 459, ...
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