Court Opinion

ID: 4476632
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:12:07.130445+00
Date Added: 2024-06-11T15:03:26.044740
License: Public Domain

Turner,/., dissenting: According to section 115 (a) of the Internal Revenue Code, a dividend is a distribution by a corporation to its shareholders, in money or property, out of its earnings or profits, and in Palmer v. Commissioner, 302 U. S. 63, the Supreme Court held that there was no payment of a dividend, “within the statutory definition,” through the mere issuance by a corporation of rights to subscribe to its stock and the receipt thereof by its stockholders, the reason being that there was no distribution of corporate assets or diminution of net worth in any practical sense; and further, that even though taxable income might result to the stockholders from the sale of the rights, there could be a distribution of corporate property “only on” the “exercise” of the rights. The conclusion in the instant case that the petitioner received a dividend through the sale of the rights, even though there was not and might never be an exercise thereof and therefore no payment of a dividend, is not only anomalous, but is directly contrary to the pronouncements of the Supreme Court in the Palmer case. I accordingly note my dissent. Murdock, /., agrees with this dissent.