Court Opinion

ID: 6884630
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:25:00.186344+00
Date Added: 2024-06-11T08:50:48.666121
License: Public Domain

HEALY, Circuit Judge
(concurring).
I agree that the deed conveying the property from Marshall Square to the taxpayer was subject to the tax assessed by the Commissioner and upheld by the trial court. The assessment falls within the plain terms both of the statute and the regulation quoted in the main opinion. The consideration paid for the conveyance was the full value of the property, since no encumbrance remained thereon upon consummation of the sale.
The remaining problem before us is a simple one and depends for its solution upon the application of the statute to the distinctive facts of the case. I think the problem is not clarified by the extended analysis of the prior decisions of this court, which in turn were decided, whether rightly or wrongly, on their own peculiar facts.
The decision below was that the reorganization plan involved two taxable transfers of rights to receive stock, namely, (1) a transfer by Marshall Square to the bondholders of the right to receive 159,-520 shares in the new company, and (2) a transfer by the bondholders to the voting trustees of the bondholders’ right to receive such shares. On the appeal the Commissioner undertook to support the trial court’s conclusion, while the appellant contends that there were no taxable transfers. The question before us is whether one or the other, or both, of the alleged transfers were involved in the transaction. No other or different transfers are contended for.
The bondholders, by the release of their lien on the property, supplied the consideration for the stock in the new company to which they were entitled under the plan. In agreeing that the stock be issued to voting trustees rather than to themselves they transferred to the trustees the right to receive the stock; and that transfer was properly held taxable. As said in Raybestos-Manhattan, Inc., v. United States, 296 U.S. 60, 64, 56 S.Ct. 63, 65, 80 L.Ed. 44, 102 A.L.R. 111, “the power to command the disposition of the shares included the right to receive them and the exercise of the power which transferred the right is subject to the tax.”
There is, however, no fair basis for assuming a transfer from Marshall Square to the bondholders. The trial court found that the 159,520 shares were delivered to the voting trustees “in consideration of” the release of the trust indenture; and that the 12,934 shares issued to Marshall Square were delivered to that company “in consideration of” its conveyance to the taxpayer of “all its right, title, and interest in and to the property.” The finding is supported by the terms of the reorganization plan and is clearly correct. In no real or substantial sense did Marshall Square ever have the right to receive any stock other than the shares actually issued to it. The conclusion reached below, namely, that Marshall Square “was entitled to receive all of the stock of the new owner in consideration of the conveyance of the property” simply does not follow from the facts found. The conclusion ignores the realities of the case. As the situation would be understood by the man in the street, all Marshall Square had to sell was a very thin equity, if any. Marshall Square received and retained all the rights in the new company to which it was ever entitled. It transferred no right to the bondholders.
To effect its purpose as a revenue measure the statute ought to be given ample *486scope; but it should, not be stretched to cover cases in which no transfer is fairly to be spelled out.