Opinion ID: 334653
Heading Depth: 1
Heading Rank: 4

Heading: allocation of the dividend

Text: 40 We note that the Commissioner originally charged each of the Kuper brothers with a dividend equal to one-third of the $42,513.54 transferred ($14,171.18) from Kuper Volkswagen to Enterprise. By amended answer, he claimed that James and Charles should have been viewed as having received the entire $42,513.54 ($21,256.77 each). See note 7 supra. The difficulty with this solution is that it would permit the Internal Revenue Service to collect taxes on $42,513.54 in dividends from James and Charles even though the Service apparently already has received taxes on a dividend of $14,171.18 from George, who never challenged the Commissioner's deficiency determination. See 61 T.C. at 628 and note 5 supra. A 100% recovery from petitioners here in addition to the former 331/3% recovery from George would result in the Government's receiving taxes on 1331/3% of the constructive dividend an overly generous result in the Government's favor. Although the case law lends some support to the Commissioner's amended position that the entire dividend should be attributed to the buyers of the Volkswagen stock, see, e. g., Casner v. Commissioner of Internal Revenue, 5 Cir. 1971, 450 F.2d 379, equity requires that the Government not collect double taxes and therefore that we apportion the dividend as the Commissioner first recommended. 19 The Commissioner's deficiency judgment with respect to the dividend assessment is sustained only to the extent of a dividend of $14,171.18 against each petitioner. 41 Finally, we reiterate our conclusion that this is not a capital contribution case, nor a redemption case. Instead, we find an exchange of stock and related dividend. In taxation, as in other areas, we take care not to miss the larger forest while too narrowly focusing on the component trees. Thus, of necessity, we have remained alert to the wider vision, lest by a process of artificial atomization, the taxpayer find his way to a tax haven not intended by our lawmakers. 42 Assuredly, a real business purpose the need to separate ownership interests in Kuper Volkswagen motivated the overall transaction here. But it cannot support the specific route followed. Clearly this conclusion is proper for the presence of business discordance cannot be permitted to justify whatever tax construct petitioners deem most beneficial to their tax liability. Were this not the rule, the Commissioner would be left defenseless against the clever tinkerers of the code who by exalting form over substance subvert the purposes inherent in our revenue statutes. AFFIRMED IN PART, REVERSED IN PART.