Court Opinion

ID: 9650808
Source: CourtListenerOpinion
Date Created: 2023-08-23 15:52:33.308561+00
Date Added: 2024-06-11T18:12:26.174875
License: Public Domain

HEALY, Circuit Judge
(concurring).
On principle, I am not able to distinguish this case from Commissioner v. Palmer, Stacy-Merrill, Inc., 9 Cir., 111 F.2d 809. The distributions there held to be deductible as interest were made through the “corporate process” of declaring dividends out of profits. I concurred somewhat doubtfully in that decision on the ground that this court was committed by Commissioner v. Proctor Shop, Inc., 9 Cir., 82 F.2d 792, to the view that the actualities of the situation were to be looked to in determining whether corporate,, distributions, whatever called, were true dividends or whether they were in fact interest on indebtedness and therefore deductible as an expense.
The securities in the two cases mentioned, and in this case, are hybrids. If they had been denominated “bonds” rather than preferred stocks, I apprehend that nobody would contend that they were not true evidences of debt or that the returns paid thereon were anything other than interest. Cf. Commissioner v. Columbia River Paper Mills, 9 Cir., 126 F.*8202d 1009. However, a corporate taxpayer has no good reason to complain if issues which it calls preferred stock are for tax purposes treated as such by the Commissioner, particularly where, as here, the corporation has theretofore customarily treated the payments as dividends in making returns of its taxable income; and where it has advised investors that, in the opinion of counsel, the returns therefrom are dividends and therefore exempt from tax. In such circumstances the corporation, having deliberately made its bed, may with propriety be required to lie in it.