Case Name: S. A. Woods Machine Co., Petitioner, v. Commissioner of Internal Revenue, Respondent
Court: United States Board of Tax Appeals
Jurisdiction: United States
Decision Date: 1930-12-19
Citations: 21 B.T.A. 818
Docket Number: Docket No. 32015
Parties: S. A. Woods Machine Co., Petitioner, v. Commissioner of Internal Revenue, Respondent.
Judges: VaN FossaN did not participate in the consideration of or decision in this report.
Reporter: Reports of the United States Board of Tax Appeals
Volume: 21
Pages: 818–822

Head Matter:
S. A. Woods Machine Co., Petitioner, v. Commissioner of Internal Revenue, Respondent.
Docket No. 32015.
Promulgated December 19, 1930.
Henry H. Dinneen, Esq., for the petitioner.
B. W. Wilson, Esq., for the respondent.

Opinion:
OPINION.
Black :
A number of cases have been considered by the Board involving the purchase by a corporation of its own capital stock and we have uniformly held that the corporation realizes no gain or loss from the purchase or sale of its own stock. Simmons & Hammond Mfg. Co., 1 B. T. A. 803; Farmers Deposit National Bank, 5 B. T. A. 520; H. S. Crooker Co., 5 B. T. A. 537.
While the circumstances under which petitioner acquired the shares of its own common stock from the Yates Co. in this proceeding are by no means the same as in the cases above cited, we think the same rule must govern. When the petitioner acquired the shares of its common stock from the Yates Co. and retired it, it was in possession of no additional assets thereby. The situation would be different if petitioner had acquired Liberty bonds or stocks and bonds of another corporation.
For example, if petitioner had acquired 1,022 shares of the common stock of the U. S. Steel Corporation, it would have then owned something which it did not own before, viz., an interest in the U. S. Steel Corporation to the extent of the common stock acquired, and its income in the transaction would be measured by the value of the common stock at the time it was acquired. United States v. Phellis, 257 U. S. 156. But when it received 1,022 shares of its own common stock, it owned no property which it did not own before. The corporation, S. A. Woods Machine Co., was already the owner, of all the property of the corporation and the acquirement of these 1,022 shares added nothing to this ownership.
It is true that the book value of the remaining 1,978 shares of common stock was increased by the acquirement and cancellation of these 1,022 shares, but that added nothing to the income of the corporation. It simply caused an appreciation in the value of the remaining shares of the common stock of the corporation.
In this proceeding we can not see where petitioner received anything which fits into the definition of income as approved in Eisner v. Macomber, 252 U. S. 189, and Towne v. Eisner, 245 U. S. 418. See also Houston Bros. Co., 21 B. T. A. 804.
Reviewed by the Board.
Decision will be entered under Rule 50.
VaN FossaN did not participate in the consideration of or decision in this report.