Court Opinion

ID: 9572686
Source: CourtListenerOpinion
Date Created: 2023-08-21 20:43:41.310954+00
Date Added: 2024-06-11T12:33:48.835663
License: Public Domain

Candler, Justice,
dissenting. As pointed out in the majority opinion; this case involves the amount of income tax due the State of Georgia for 1956 by W. N. Carter, Jr., and his wife, Sarah C. Carter. The State Revenue Commissioner refused to approve their joint return for such year and issued a deficit assessment against them for $9,064.51, plus interest. On their appeal of the assessment to the Superior Court of Muscogee County, the Commissioner’s action was upheld. The Court of Appeals reversed the judgment, and this court, on application therefor, granted the writ of certiorari. One item of income reported by such taxpayers for the year involved was a stated amount which Mr. Carter, as sole stockholder of a named corporation, received through distribution to him of all of the assets which such corporation had at the time of its dissolution on February 14, 1956, and this *827is the reported income on which the Revenue Commissioner made a deficit assessment. The Court of Appeals, in reversing the judgment of the trial court, held that these taxpayers, under the provisions of Code Ann. § 92-3120 (d), as codified from this State’s income tax statute of 1931, had a right, as they did, to treat the entire amount as so distributed to Mr. Carter as proceeds received by him from a sale of his stock in the dissolved corporation, and to have the amount of income tax he should pay on the profit he earned from such a sale of his stock computed on the basis of a capital gain and taxed as such under the provisions of Code Ann. § 92-3119 (d). The affirmance of that holding by four of the Justices of this court is in my opinion palpably erroneous; it gives no effect whatsoever to the provisions of Code Ann. § 92-3002 (o), which comes from a 1937 amendment to our income tax act of 1931, and such amendment in part declares that, “The word ‘dividend’ when used in this law for the purpose of defining a taxable dividend means any distribution made by a corporation out of its earnings or profits to its shareholders or members whether such distribution be made in cash or in other property or in a stock different from the stock on which the dividend is paid. It includes such portion of the assets of a corporation distributed at the time of dissolution as would in effect be a distribution of earnings.”
A casual reading of this State’s income tax act of 1931 and the amendment to it of 1937, as the pertinent part of each relates to the imposition of a tax on the funds which a corporate stockholder receives through a distribution of its earnings on dissolution of the corporation, convinces me that the legislature by the 1937 amendment fully intended to and did actually change the taxable status of the funds so received by such a stockholder from a distribution of the corporation’s earnings. As previously stated, the pertinent part of this State’s 1931 income tax act (§ 92-3120 (d)) treated the amount which a stockholder received through a distribution of a dissolved corporation's assets as a capital gain if the amount so received by him exceeded the cost of his stock, and as a capital loss if the amount so received by him was less than the cost of his stock. Hence, under the act of 1931, an income taxpayer in computing his tax for the year *828during which such a distribution was made to him could report a taxable gain on his stock or a taxable loss thereon as the case might be, and compute his tax accordingly. But the 1937 amendment to the act of 1931 expressly and emphatically declares that any funds which a stockholder of a dissolved corporation receives through a distribution of its earnings shall for income tax purposes be treated as a dividend on his stock; that is, as ordinary taxable income, and this is unquestionably true whether it be in fact a gain or a loss to him on the cost of his stock. But by the amendment of 1937 the legislature, by words which ought not to be misunderstood, has clearly said that the funds which a stockholder receives through a distribution to him of a dissolved corporation’s earnings shall be treated for income tax purposes as a dividend on his stock; and under Code Ann. § 92-3107 (a), a dividend which one receives on corporate stock is taxable as any other ordinary income of the taxpayer.
In reaching the conclusion which I have expressed in this dissent, I am not unmindful of the rule that repeals by implication are not favored by law, and that a subsequent statute repeals prior legislative action by implication only when they are clearly and indubitably contradictory, when they are in irreconcilable conflict with each other', and when they cannot reasonably stand together. But after giving full effect to this rule, I am compelled to conclude that the legislature by the 1937 amendment intended to and did repeal by implication Code Ann. § 92-3120' (d) insofar as it relates to the taxable status and the method to be employed in computing the amount of income tax due this State on that part of the earnings of a corporation distributed to a stockholder thereof on dissolution of the corporation for any reason. In this connection, see Moore v. Baldwin County, 209 Ga. 641 (74 S. E. 2d 449), and the several cases there cited. The 1937 amendment, by the use of unambiguous words, plainly says that the earnings of a corporation when distributed to a stockholder upon dissolution of the corporation shall be treated as a dividend on his stock and taxed as such, and to this extent it is in irreconcilable conflict with the pertinent part of the 1931 act which declares that, “The distribution to the taxpayer of the assets of a corporation shall be treated as a sale of *829the stock or securities of the corporation owned by him, and the gain or loss shall be computed accordingly.” For the reasons stated above, it is my opinion that the judgment rendered by the Court of Appeals should be reversed. I am authorized to say that Chief Justice Duckworth and Presiding Justice Head concur in this dissent.