Source: http://masscases.com/cases/sjc/272/272mass502.html
Timestamp: 2019-04-18 15:40:40+00:00

Document:
ALICE R. ALLEN & others, trustees, vs. COMMISSIONER OF CORPORATIONS AND TAXATION.
Present: RUGG, C.J., PIERCE, WAIT, & FIELD, JJ.
When a stockholder in a corporation receives from the corporation rights to subscribe for more of its stock and later sells them for a price greater than a market value which they had at the time he received them, he is taxable, under G. L. c. 62, s. 5 and 7, as amended, respectively, by s. 1 and 2 of St. 1928, c. 217, only upon the excess of such sale price over the market value of the rights when acquired by him, and not upon the entire sale price.
If the meaning of a statute is plain, it cannot be affected by resort to proceedings incident to its passage or by a construction put upon it by a department of the Commonwealth charged with its application and enforcement.
COMPLAINT, filed in the Superior Court for the county of Suffolk on October 5, 1929, under G. L. C. 62, s. 47, by trustees under the will of Thomas Allen, for abatement of an income tax.
tember 1, 1929, the commissioner of corporations and taxation assessed upon the complainants an income tax at the rate of three per cent on the whole amount received by the complainants from the sale of the said rights to wit, $15,484.71, which tax was in the amount of $464.54. The tax then was paid under protest, an application for abatement was made to and was refused by the commissioner, and these proceedings were instituted.
"If it be material, it is agreed that since the enactment of St. 1916, c. 269, the defendant commissioner and his predecessor in office have uniformly construed the said income tax statute as imposing a tax at the rate of three per cent upon the sale of rights declared upon corporate stock owned by inhabitants of Massachusetts, the said tax on rights being levied upon the whole amount received by any Massachusetts inhabitant from the sale of the said rights declared upon stock owned by him. This construction of St. 1916, c. 269, especially s. 5 (c) and 7 thereof, and of G. L. c. 62, especially s. 5 (c) and 7 thereof, has been uniform since 1916, despite amendments to the said acts, chapters, and sections, including the amendment to G. L. c. 62, s. 7, contained in St. 1928, c. 217, s. 2."
The contention of the complainants was that the tax should have been assessed on the difference between the amount for which the rights were sold and their value when they were acquired by the complainants, i.e., on $1,043.39; and should be only $31.31.
The judge ordered judgment for the respondent. The complainants appealed.
T. Allen, for the complainants.
R. A. Cutter, Assistant Attorney General, for the respondent.
makes as such trustee. If, in any exchange of shares upon the reorganization of one or more corporations or of one or more partnerships, associations or trusts, the beneficial interest in which is represented by transferable shares, the new shares received in exchange for the shares surrendered represent the same interest in the same assets, no gain or loss shall be deemed to accrue from the transaction until a sale or further exchange of such new shares is made." Section 7 as finally amended: ". . . In determining gains or losses realized from sale of capital assets, the basis of determination, in case of property owned on January first, nineteen hundred and sixteen, shall be the value on that date, and in case of property acquired by purchase thereafter, the cost thereof. If the property other than stock dividends in new stock of the company issuing the same was acquired otherwise than by purchase, the basis of determination of the gain or loss shall be the value on the date when it was so acquired."
c. 217, s. 2, governing the case at bar. The amendment has no effect on the meaning of "value." The meaning established by the Parker decision must stand.
It has been earnestly argued that this result was not intended by the General Court; the history of the origin of said c. 217 is invoked in support of that argument. The plain meaning of a statute cannot be affected by resort to proceedings incident to its passage. Light may be sought from that source only to illumine statutory language of doubtful import. Other information than that afforded by the words of the statute can be examined only to aid in the solution of an ambiguity. We can only interpret the words of the statute: we cannot speculate as to the probable intention of the Legislature apart from those words. Selectmen of Natick v. Boston & Albany Railroad, 210 Mass. 229, 232. Old South Association v. Boston, 212 Mass. 299, 304-305. United States v. Missouri Pacific Railroad, 278 U. S. 269, 278.
sess before," and that the "amount for which he sells them is a gain," were used by way of argument to show that in their nature gains arising from the sale of such rights constituted income which might be treated by the General Court as income under the Forty-fourth Amendment. That statement cannot rightly be wrested from its context and construed as an interpretation of the basis of taxation established by the statute. See Vigeant v. Postal Telegraph Cable Co. 260 Mass. 335, 343. (2) The governing statute in the case at bar, St. 1928, c. 217, s. 2, is different from St. 1916, c. 269, s. 7, in force at the time of the decision of the Putnam case. As already pointed out, the words of the latest amendment, in view of the decision in Parker v. Commissioner of Corporations & Taxation, supra, make clear the intention of the Legislature to tax gains from the sale of such rights, not on the basis that the amount for which they are sold is a gain, all of which may be made subject to the income tax, but only on the basis that the gain subject to the tax is measured by the difference between the market value of such rights when received by the taxpayer and the market value for which they are sold. That is the measure established for ascertaining the gain or loss from the sale of all capital assets (except stock dividends) acquired otherwise than by purchase. It comprehends the gains from the sale of rights to subscribe in new stock. (3) The departmental construction of St. 1928, c. 217, s. 2, the statute at present governing the subject, has not been long continued and the rule as to weight to be attributed to such construction when long continued and sanctioned. by the acquiescence of the Legislature illustrated by Burrage v. County of Bristol, 210 Mass. 299, 301, is not applicable. Moreover, that rule cannot be invoked against the plain words of a statute.
It follows that abatement ought to have been granted. The order of judgment for the defendant is reversed. Decree is to be entered granting abatement on the footing that the gain of the complainants subject to tax as income was $1,043.39.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v.