Source: https://supreme.justia.com/cases/federal/us/303/564/
Timestamp: 2019-04-22 04:03:32+00:00

Document:
A gain resulting to a corporation from the assumption and payment of its bonded indebtedness by another corporation, with which it merged, held not exempt from income tax under Revenue Act of 1928, § 112. P. 303 U. S. 567.
Certiorari, 302 U.S. 680, to review the affirmance of a judgment in favor of the taxpayer, 17 F.Supp. 558, in a suit to recover an alleged overpayment of income taxes.
"gains, profits, and income derived from . . . trades . . . or sales, or dealings in property, . . . or gains or profits and income . . . from any source whatever. [Footnote 2]"
Section 112 of the Act [Footnote 3] exempts certain gains which are realized from a "reorganization" similar to, or in the nature of, a corporate merger or consolidation. Under this section, such gains are not taxed if one corporation, pursuant to a "plan of reorganization" exchanges its property "solely for stock or securities in another corporation a party to the reorganization." But, when a corporation not only receives "stock or securities" in exchange for its property, but also receives "other property or money" in carrying out a "plan of reorganization,"
"(1) If the corporation receiving such other property or money distributes it in pursuance of the plan of reorganization, no gain to the corporation shall be recognized from the exchange, but"
"(2) If the corporation receiving such other property or money does not distribute it in pursuance of the plan of reorganization, the gain, if any, to the corporation shall be recognized [taxed]."
which respondent is transferee. The Court of Appeals, believing there was an exemption under § 112, affirmed [Footnote 4] the judgment of the District Court [Footnote 5] holding all Hendler gains nontaxable.
This controversy between the government and respondent involves the assumption and payment-pursuant to the plan of reorganization -- by the Borden Company of $534,297.40 bonded indebtedness of the Hendler Creamery Company, Inc. We are unable to agree with the conclusion reached by the courts below that the gain to the Hendler Company, realized by the Borden Company's payment, was exempt from taxation under § 112.
"If the corporation receiving such other property or money does not distribute it in pursuance of the plan of reorganization, the gain, if any, to the corporation shall be recognized [taxed]. . . ."
* See definition of Dispute, Webster's New International Dictionary; 29 U.S.C. § 113(c); Senate Report No. 163, 72nd Congress, 1st Session, pp. 7, 11, 25; House Report No. 669, 72nd Congress, 1st Session, pp. 3, 7, 8, 10, 11.
Revenue Act of 1928, c. 852, 45 Stat. 791, 797, § 13.
Old Colony Trust Co. v. Commissioner, 279 U. S. 716, 279 U. S. 729; Douglas v. Willcuts, 296 U. S. 1, 296 U. S. 8-9.

References: § 112
 § 112
 § 112
 § 113
 § 13
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