Walville Lumber Co. v. Commissioner of Internal Revenue
| Decision Date | 21 October 1929 |
| Docket Number | No. 5710.,5710. |
| Citation | 35 F.2d 445 |
| Parties | WALVILLE LUMBER CO. v. COMMISSIONER OF INTERNAL REVENUE. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Andrew G. Elder and Joseph Nievinski, both of Seattle, Wash., for petitioner.
Sewall Key and Millar E. McGilchrist, Sp. Assts. to Atty. Gen. (C. M. Charest, General Counsel, and P. S. Crewe, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for respondent.
Before DIETRICH and WILBUR, Circuit Judges, and LOUDERBACK, District Judge.
By the Commissioner of Internal Revenue it was held that appellant's income and profits taxes for 1919 were deficient in the sum of $7,514.86. Unsuccessfully the taxpayer sought relief from the Board of Tax Appeals, and from the order dismissing its petition it prosecutes this appeal. See section 1001 of the Revenue Act of 1926 (26 USCA § 1224).
The claimed deficiency is attributable to the refusal of the Commissioner to allow appellant a loss alleged to have been suffered by it on 4,400 shares of the stock it held in the Wallworth & Neville Manufacturing Company, which were liquidated in 1919 upon the dissolution of that company (hereinafter referred to as the Manufacturing Company).
Appellant was incorporated under the laws of Washington in 1908, with an authorized capital of $1,000,000, consisting of 10,000 shares of the par value of $100 each. In consideration for the issuance to various individuals of all of its stock, it acquired in that year from the Manufacturing Company, a Michigan corporation, certain lands, timbered and cut over, a sawmill, a factory, and equipment, and also 4,400 shares of its common stock, all estimated to have been of a value of $1,107,329. At that time the Manufacturing Company had outstanding 8,000 shares of its common stock and 1,000 shares preferred, all of the par value of $100 per share. Appellant never owned any of the preferred stock, but continued to hold the 4,400 shares of common thus acquired up to the time of the dissolution of the Manufacturing Company in 1919. In 1919, the Manufacturing Company, in turn, owned 5,541 shares of the appellant's stock.
In that year without consideration the appellant reduced its capital stock from 10,000 to 5,000 shares, one-half thereof being common and one-half preferred — all of the par value of $100 per share. It would seem that at that time the Manufacturing Company was indebted to the holders of its 1,000 shares preferred stock on account of accumulated but unpaid dividends thereon, and also contemplated dissolution, and by agreement on the part of all concerned, instead of issuing to the Manufacturing Company the 1,385¼ shares of appellant's new, preferred stock, to which it was entitled upon reduction of appellant's capital stock as already explained, the latter issued these shares to the several holders of the Manufacturing Company's preferred stock in satisfaction of their rights as such holders; and issued the other 1,114¾ shares of its preferred stock to its stockholders other than the Manufacturing Company. In like manner it issued to its own stockholders other than the Manufacturing Company 1,114¾ shares of its new, common stock, but, instead of issuing to the Manufacturing Company the other 1,385¼ shares thereof, to which the latter was entitled, pursuant to the common understanding of all interested parties as already explained, it recognized the holders of the Manufacturing Company's common stock as the beneficiaries and accordingly issued to all such stockholders, except itself, the shares to which they were so entitled, aggregating 629¼ shares, and held unissued the other 756 shares which, if issued, would have come to it as a holder of the 4,400 shares of the Manufacturing Company's common stock. As was the intention of all parties...
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