Westmoreland Coal Co. v. MacLaughlin
| Decision Date | 23 March 1934 |
| Docket Number | No. 16792.,16792. |
| Citation | 8 F. Supp. 963 |
| Parties | WESTMORELAND COAL CO. v. MacLAUGHLIN. |
| Court | U.S. District Court — Western District of Pennsylvania |
Charles Myers, of Barnes, Biddle & Myers, of Philadelphia, Pa., for plaintiff.
E. F. McMahon, Sp. Asst. to Atty. Gen., and Thomas J. Curtin, Asst. U. S. Atty., and Charles D. McAvoy, U. S. Atty., both of Philadelphia, Pa., for defendant.
This is an action at law, brought to recover $4,000 paid for United States revenue stamps which the plaintiff was required to purchase and affix to its minute book in consequence of a transaction which the department held to be a transfer to its stockholders of the right to receive shares of stock.
Jury trial was waived and a stipulation of facts filed which constitutes the most important part of the record.
The pertinent words of the statute (Revenue Act of 1926, tit. 8 section 800 et seq., Schedule A(3), 26 USCA § 901, Schedule A (3) impose a stamp tax "on all sales * * * or transfers of legal title to shares or certificates of stock * * * or to rights to * * * receive such shares or certificates."
The occasion for the tax arose in connection with a reorganization of the plaintiff's finances, the essence of which was that a new corporation (referred to as the Delaware Corporation) would be formed to take over all of the physical assets of the plaintiff plus a certain amount of its cash and securities and that the plaintiff's stockholders would get the stock of the new corporation. This was what was actually done. The whole question here is whether it was accomplished by one or two steps.
The tax was imposed on the theory that the Pennsylvania corporation (the plaintiff), upon the transfer of its assets to the Delaware corporation, became the owner of a right to receive the shares of stock of that corporation and that it then passed along or transferred this right to its own stockholders. The issuance of its stock by the Delaware corporation was taxed and (it is conceded) legally. It is or must be also conceded that if the transaction really was as above stated and if, as the government contends, there was a second distinct step, the second tax also was properly imposed.
On paper there was only one step. That is to say, the new stock of the Delaware corporation was issued directly (through the medium of a transfer agent) to the stockholders of the Pennsylvania corporation without passing through the hands of that corporation. Still, that does not settle the matter since this may have been only a short cut and the plaintiff could have the right to receive the stock without formal action.
The ultimate question is whether the plaintiff corporation ever got any such right. If it did, it must have transferred it to its stockholders since they got the stock. To answer the question we must carefully examine the contract between the two corporations to see just what rights arose from it. The evidence of this contract is to be found in the resolutions of the two corporations and in what was done by their officers or agents under those resolutions.
The plaintiff's resolutions constituted the offer, and were adopted...
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