Source: https://openjurist.org/325/us/283/commissioner-of-internal-revenue-v-bedfords-estate
Timestamp: 2018-02-24 14:34:20
Document Index: 790967464

Matched Legal Cases: ['§ 112', '§ 112', '§ 112', '§ 112', '§ 112', '§ 115', '§ 112', '§ 112', '§ 115', '§ 115', '§ 112', '§ 115', '§ 115', '§ 112', '§ 115', '§ 112', '§ 115', '§ 112', '§ 350', '§ 350']

325 U.S. 283 - Commissioner of Internal Revenue v. Bedford's Estate
325 US 283 Commissioner of Internal Revenue v. Bedford's Estate
BEDFORD'S ESTATE.
The Rules of the court below governing opinions, rehearings, issuance of mandate and stay of mandate are invoked to show that the 'Opinion' is the appealable 'judgment'. These Rules, like other rules, are not phrased with such fastidious precision as to make of all the parts a perfect harmony. But while substantial debating points may be taken,3 nothing in these Rules contradicts the natural meaning yielded by the terms of the 'Opinion' and the 'Order of Mandate', as reflected in the practice of the Second Circuit and in our own, which treats not the 'Opinion' but the 'Order for Mandate' as the order of judgment. The Rules would have to be far less artistic than they are to warrant us in holding that the Circuit Court of Appeals has consistently misinterpreted some of its own Rules. Whether the announcement of an opinion and its entry in the docket amounts to a judgment for purposes of appeal or whether that must await some later formal act, ought not to be decided on nice-spun argumentation in disregard of the judicial habits of the court whose judgment is called into question, of the bar practising before it, of the clerk who embodies its procedural traditions, as well as in conflict with the assumption of the reviewing court.
By comparing the fair market value of the old preferred shares at the date of Bedford's death with the market value of the new stock and cash received the gain to his estate was $139,740. Admittedly the recapitalization was a reorganization, § 112(g)(1)(D) of the Revenue Act of 1936, 49 Stat. 1648, 1681, 26 U.S.C. § 112(g)(1)(E), 26 U.S.C.A. Int.Rev.Code, § 112(g)(1)(E), so that only the cash received, but none of the stock, is taxable. Sections 112(b)(3), 112(c)(1), 49 Stat. 1648, 1679, 1680, 26 U.S.C. §§ 112(b)(3), 112(c)(1), 26 U.S.C.A. Int.Rev.Code, § 112(b)(3), (c)(1). The sole issue is whether the cash, $45,240, is taxable as a dividend, or merely as a capital gain to the extent of 40%. The Tax Court sustained the determination of the Commissioner that the cash was taxable as a dividend, 1 T.C. 478, but was reversed by the Circuit Court of Appeals. 144 F.2d 272. On a showing of importance to the administration of the Revenue Acts, we granted certiorari. 323 U.S. 707, 65 S.Ct. 439.
Although Abercrombie & Fitch showed a book deficit in the surplus account because the earlier stock dividends had been charged against it, the parties agree that for corporate tax purposes at least earnings and profits exceeding the distributed cash had been earned at the time of the recapitalization. That cash therefore came out of earnings and profits and such a distribution would normally be considered a taxable dividend, see § 115(a), 26 U.S.C.A. Int.Rev.Acts page 868,4 and has so been treated by the courts in seemingly similar situations. It has been ruled in a series of cases that where the stock of one corporation was exchanged for the stock of another and cash and then distributed, such distributions out of earnings and profits had the effect of a distribution of a taxable dividend under § 112(c)(2). Com'r v. Owens, 5 Cir., 69 F.2d 597; Com'r v. Forhan Realty Corp. 2 Cir., 75 F.2d 268; Rose v. Little Inv. Co., 5 Cir., 86 F.2d 50; Love v. Com'r, 3 Cir., 113 F.2d 236; Campbell v. United States, 3 Cir., 144 F.2d 177. The Tax Court has reached the same result, that is, has treated the distribution as a taxable dividend, in the case of the recapitalization of a single corporation. McCord v. Com'r, 31 B.T.A. 342, 344; J. Weingarten, Inc., v. Com'r, 44 B.T.A. 798, 808, 809; Knapp Monarch Co. v. Com'r, 1 T.C. 59, 69, 70, affirmed on other grounds, 8 Cir., 139 F.2d 863. We cannot distinguish the two situations and find no implication in the statute restricting § 112(c)(2) to taxation as a dividend only in the case of an exchange of stock and assets of two corporations.
Respondent, however, claims that this distribution more nearly has the effect of a 'partial liquidation' as defined in § 115(i).5 But the classifications of § 115, which governs 'Distributions by Corporations' apart from reorganizations, were adopted for another purpose. They do not apply to a situation arising within § 112. The definition of a 'partial liquidation' in § 115(i) is specifically limited to use in § 115. To attempt to carry it over to § 112 would distort its purpose. That limitation is not true of § 115(a) which defines 'dividend' for the purpose of the whole title. Accordingly, this definition is infused into § 112(c)(2). Under § 115(a) a distribution out of accumulated earnings and profits is a 'dividend', thus confirming the conclusion that a distribution of earnings and profits has the 'effect of the distribution of a taxable dividend' under § 112(c)(2).
'Sec. 8(a) That no writ of error, appeal, or writ of certiorari, intended to bring any judgment or decree before the Supreme Court for review shall be allowed or entertained unless application therefor be duly made within three months after the entry of such judgment or decree, excepting that writs of certiorari to the Supreme Court of the Philippine Islands may be granted where application therefor is made within six months: Provided, That for good cause shown either of such periods for applying for a writ of certiorari may be extended not exceeding sixty days by a justice of the Supreme Court.' 43 Stat. 936, 940, 28 U.S.C. § 350, 28 U.S.C.A. § 350.