Source: http://supreme.nolo.com/us/305/281/case.html
Timestamp: 2019-11-18 04:31:28
Document Index: 553624139

Matched Legal Cases: ['§ 115', '§ 111', '§ 101', '§ 12', '§ 101', '§ 22', '§ 23', '§ 23', '§ 101', '§ 101', '§ 101', '§ 22', '§ 111', '§ 201', '§ 115', '§ 23', '§ 101']

WHITE V. UNITED STATES, 305 U. S. 281 - Volume 305 - 1938 - Full Text - US Supreme Court Center - USSC Cases - Nolo
US Supreme Court Center > Volume 305 > WHITE V. UNITED STATES, 305 U. S. 281 (1938) > Full Text
WHITE V. UNITED STATES, 305 U. S. 281 (1938)
5. The argument that doubts must be resolved in favor of the taxpayer is rejected. P. 305 U. S. 292.
and "ordinary
"Upon the sale or exchange of property, the entire amount of the gain or loss determined under section 111 shall be recognized, except as hereinafter provided in this section. [Footnote 1]"
Petitioners concede that the command of § 115(c) that amounts distributed in complete liquidation of a corporation "shall be treated as in full payment in exchange for the stock" and that the "gain or loss . . . shall be determined under section 111," requires the gain or loss upon liquidation to be determined as are gains or losses upon sale of the stock under §§ 111, 113. The same method is adopted by 101 for determining gains or losses from sales of capital assets. [Footnote 2] But they insist that the qualification
Sections 12, 21, 22 and 23, found in subtitle B, General Provisions, to which §§ 101 and 115 are supplementary, govern computation of net income and of the tax. Subsection (c) of § 12, 45 Stat. 797, which fixes the rates of surtax, refers specifically to § 101 for the rate and computation of tax on capital net gains and losses. [Footnote 3] Section 21 declares that net income means gross income computed under § 22, less the deductions allowed by § 23. As already noted, § 23(e), (g), providing for deductions of losses on sales or exchanges of property, is restricted in its operation by the provisions of § 101. Otherwise, § 101 would have no application to deductible losses. These general provisions thus incorporate by reference those of § 101, and give to them controlling effect in the computation of the tax in cases of capital gains or losses upon the sale or exchange of capital assets. In addition, § 22(d) provides that "[d]istributions by corporations shall be taxable to the shareholders as provided in section 115," which in turn, as already noted, provides in paragraph (c) that liquidating dividends "shall be treated as in full payment in exchange for the stock," and that resulting gains or losses determined, as in the case of sales or exchanges of property, under § 111, are to be "recognized only to the extent provided in section 112," which also deals with sales and exchanges.
exchange for stock or shares. . . ." [Footnote 4] In Hellmich v. Hellman, 276 U. S. 233, it was held that this clause required a stockholder's gains upon liquidation to be treated as gains from the sale of property, and therefore subject to the normal tax, although they were distributions from corporate earnings, and, under §§ 201(a), (b) and 216(a), 40 Stat. 1059, 1069, dividends paid from such earnings were free from normal tax. The provisions of § 115(c) prescribing the treatment of liquidating dividends were thus, from the beginning, taken to refer to the computation of the tax, as well as to the determination of the gain or loss.
the tax in the same manner as corresponding gains from sales. [Footnote 5]
from gains and losses on sales. Helvering v. Chester N. Weaver Co., post, p. 305 U. S. 293.
Petitioner argues that the construction which we think correct leads to the harsh and absurd consequence that a small liquidating dividend is more disadvantageous to the taxpayer than no distribution at all in the case where the stock has become worthless. This is an argument, more properly addressed to Congress, that the statute should have gone further than it did by providing that the loss in the case of worthless securities should be treated as a loss upon their sale, as was later done by § 23(g)(2) of the 1938 Act. But it is not persuasive that we should disregard the language and history of the pertinent sections, with consequences equally harsh and absurd, to adopt the construction for which petitioners contend. Cf. Helvering v. Twin Bell Oil Syndicate, 293 U. S. 312, 293 U. S. 321.
We are not impressed by the argument that, as the question here decided is doubtful, all doubts should be resolved in favor of the taxpayer. It is the function and duty of courts to resolve doubts. We know of no reason why that function should be abdicated in a tax case more than in any other where the rights of suitors turn on the construction of a statute and it is our duty to decide what that construction fairly should be. Here, doubts which may arise upon a cursory examination of §§ 101 and 115 disappear when they are read, as they must be, with every other material part of the statute, Hellmich v. Hellman, supra, 276 U. S. 237, and in the light of their legislative history. Moreover, every deduction from gross income is allowed as a matter of legislative grace, and
New Colonial Ice Co. v. Helvering, 292 U. S. 435, 292 U. S. 440.
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