Court Opinion

ID: 4487637
Source: CourtListenerOpinion
Date Created: 2020-01-17 22:00:52.986606+00
Date Added: 2024-06-11T07:58:37.038395
License: Public Domain

Love,
dissenting: I can not agree with the decision reached in this case. It is true that as a matter of law we are dealing with two separate and distinct entities, one individual, and the other corporate.
Under ordinary conditions those separate entities should be dealt with as separate entities, but every court in the land, including the United States Supreme Court, has justified and endorsed the procedure, in dealing with tax cases under peculiar conditions, of disregarding the corporate entities, and looking through the insubstantial and transparent partition veil between the individual entity and the corporate entity, or two corporate entities, and treating that which is in law two entities, as in truth and in fact, and for all economic purposes, as one entity.
*1275It may be said parenthetically that Congress has followed the same idea in providing for consolidated returns of affiliated corporations. The following are some of the c,ases in which this procedure has been recognized: In re Muncie Pulp Co., 139 Fed. 546; Southern Pacific Co. v. Lowe, 247 U. S. 330; Gulf Oil Corporation v. Lewellyn, 248 U. S. 71; McCaskill Co. v. United States, 216 U. S. 514-5.
It is true that in most of the cases reported the corporation entity was ignored in order to circumvent the perpetration of fraud upon the Government, but certainly it will not be contended that those cases do not justify a like course to be pursued in order to do justice to the taxpayer. In the instant case the facts are disclosed by the record that H. M. Wagner owned, in his individual capacity, the entire Baltimore business, and owned 396 out of the 400 shares of stock of the corporation business in Washington; that he dictated the business policy of each business; that he operated both businesses in conjunction by purchasing merchandise in large quantities in his individual name for both houses, in one purchase contract, and only allocated such merchandise by shipping orders; and the facts clearly indicate that in the particular instance of the purchase of “ shorts ” on the stock market, he bought such shorts to offset losses which his judgment told him would be the result of the unwise action on the part of his son and Bemmert in buying too much sugar for future delivery, not alone to the Baltimore house, but to both houses. The loss that did accrue to the corporation by its having to take its proportion of the high priced sugar on those future deliveries was H. M. Wagner’s loss, 99 per cent as much as if the Washington business had been an individual rather than a corporate business.
The Washington house suffered its proportion of loss on the handling of that high priced sugar, 12 cars out of the total 36 cars so purchased, and in equity is entitled to the same proportion of the profits made on the purchase of shorts that was made for the expressed purpose of offsetting that particular loss which Wagner believed would result.
The United States Supreme Court, in Eisner v. Macomber, 252 U. S. 213, 214, states:
We have no doubt of the power or duty of a court to look through the form of the corporation and determine the question of the stockholder’s right in order to ascertain whether he has received income taxable by Congress.
I have not seen a case reported that, in my judgment, more perfectly justifies the disregarding the corporate entity and treating as an entity that which is in fact one man’s one business.
Tkussell and SieekiN concur in the dissent.