Court Opinion

ID: 9651290
Source: CourtListenerOpinion
Date Created: 2023-08-23 16:12:40.769772+00
Date Added: 2024-06-11T13:25:44.438411
License: Public Domain

PHILLIPS, Circuit Judge
(dissenting).
The Commissioner had found that the sale of the elevators was made by the Wichita Terminal Elevator Company,1 and that the capital gain derived from such sale was income to the corporation. To overcome the presumption that such finding was correct, the petitioners introduced evidence which established these facts: Between June 7 and June 12, inclusive, all of the stockholders of the corporation duly executed certificates of stock ownership and written consent to dissolution of the corporation, in accordance with § 17-3603, 1945 Supp. Kan. G. S. 1935. On June 12, 1944, L. II. Powell, president, and C. P. Garretson, secretary of the corporation, *518executed a certificate setting forth the names and addresses of the stockholders of the corporation and the number of shares held by each, and stating that such persons were the only holders of the capital stock of the corporation issued and outstanding. Such certificates and consent to dissolution were filed in the office of the Secretary of State of Kansas,' on June 16, 1944. On that date, the Secretary of State issued a certificate of dissolution which was duly published and proof of such publication was filed in the office of the Secretary of State on June 23, 1944. Between June 7 and June 12, inclusive, all of the stockholders of the corporation duly executed a writing which recited that they, as stockholders of the corporation in the process of dissolution, appointed L. H! Powell as their agent and attorney in fact to take and receive from the corporation transfers by deeds, bills of sale and other instruments, the assets of the corporation, and to sell, transfer, and convey, upon such terms, at such prices, and under such 'conditions as he might determine advantageous, all of the assets of the corporation coming into his hands as such agent.
On' June 16, 1944, the corporation executed and delivered to' Powell a warranty deed conveying to Powell the terminal elevator at Wichita, Kansas, and bills of sale transferring to Powell, as agent of the stockholders of the corporation, the four country elevators. On June.23, 1944, Powell, as agent for the former stockholders of the corporation, and Wichita Terminal Elevator, Inc., entered into a contract for the sale of the terminal elevator and the four country elevators for $289,350. The contract provided for a cash payment of $25,000, and for the payment of the balance of the purchase price upon the delivery of proper conveyances and the possession of the elevators. On June 27, 1944, Powell and Lucy T. Powell, his wife, executed and delivered to Wichita Terminal Elevator, Inc., a warranty deed conveying to it the terminal elevator at Wichita. On the same date, Powell executed and delivered to Wichita Terminal Elevator, Inc., bills of sale transferring to it the four country elevators.
The presumption of the correctness of the Commissioner’s determination is one of law. It is not an inference of fact. It disappears when evidence sufficient to support a contrary finding has been introduced.2
When the petitioners introduced evidence of the transfer of the elevators to Powell, as agent for the stockholders of the corporation, the due dissolution of the corporation, and the sale and transfer of the elevators by Powell, as agent for the stockholders, to Wichita Terminal Elevator, Inc., they made out a prima facie case that the elevators were distributed in kind and in liquidation, to the stockholders, and by them sold to Wichita Terminal Elevator, Inc.
The Tax Court held that the burden was on petitioners to prove that the formal actions taken, namely, the transfer of the elevators to the stockholders, the dissolution of the corporation, the conveyance and transfers to Powell, and the sale and transfer of the elevators by Powell, as agent of the stockholders, to Wichita Terminal Elevator, Inc., were not in fact a cloak to cover an actual sale of the elevators by the corporation. I disagree with that holding.
When evidence had been introduced by petitioners sufficient to support a finding that the elevators were distributed to the stockholders in kind and in liquidation, that *519the corporation was duly dissolved, and that the elevators were sold and transferred by the stockholders to Wichita Terminal Elevator, Inc., the proof of correctness of the Commissioner’s determination disappeared, he could no longer rely on such presumption to support his determination, and the burden was upon him to support the correctness of his determination by evidence. 3
For the foregoing reasons, I do not think we reach the question of whether the evidence introduced by the Commissioner was sufficient to support the finding of the Tax Court.
If in fact Powell, acting for the corporation, entered into an agreement, oral or in writing, with Ross, for the sale of the elevators by the corporation to Wichita Terminal Elevator, Inc., notwithstanding the formalities by which the elevators were distributed by the stockholders, and by them sold and transferred to Wichita Terminal Elevator, Inc., the sale for tax purposes would be a sale by the corporation.4 However, it is my view that when the proper rule of burden of proof is applied, the evidence introduced by the Commissioner was insufficient to support a finding that the sale of the elevators was made by the corporation. A finding that the negotiations between Powell and Ross, prior to June 16, 1944, resulted in a firm agreement on the part of Powell, acting for the corporation for the sale of the elevators by the corporation, in my opinion, would be wholly conjectural. On the contrary, it seems to me the only reasonable inference that may be drawn from the evidence is that if Powell entered into any agreement with Ross, prior to June 23, 1944, it was to undertake to bring about a dissolution of the corporation, the distribution of the elevators to the stockholders of the corporation, and the sale of the elevators by the stockholders to Wichita Terminal Elevator, Inc.
Finally, it is my view that there was a distribution by the corporation of its assets to its stockholders in kind and in complete liquidation. The elevators were transferred by the corporation to its stockholders unconditionally. It was a distribution in kind and in liquidation. The fact that the stockholders, in their power of attorney to Powell, authorized and directed Powell to pay any outstanding debts of the corporation from the proceeds of the sale of the assets distributed to the stockholders would not operate to make the distribution not one in kind and in liquidation. When the corporation distributed its assets among its stockholders, the law imposed upon each stockholder the obligation to discharge any unpaid debts of the corporation up to the value of the assets he received.5 The authorization and direction in the power of attorney was not to meet any condition or requirement imposed by the corporation when it distributed its assets to the stockholders, but rather to discharge an obligation imposed by law on the stockholders.
I would reverse and remand with directions to proceed further in accordance with the views herein expressed.

 Hereinafter called the corporation.

 Crude Oil Corporation of America v. Commissioner of Internal Revenue, 10 Cir., 161 F.2d 809; Hemphill Schools, Inc., v. Commissioner of Internal Revenue, 9 Cir., 137 F.2d 961, 964; Wiget v. Becker, 8 Cir., 84 F.2d 706, 708; Lawrence v. Commissioner of Internal Revenue, 9 Cir., 143 F.2d 456, 459; J. M. Perry & Co. v. Commissioner of Internal Revenue, 9 Cir., 120 F.2d 123, 124; E. Albrecht & Son v. Landy, 8 Cir., 114 F.2d 202, 206; Andrews v. Commissioner of Internal Revenue, 2 Cir., 135 F.2d 314, 319; Cory v. Commissioner of Internal Revenue, 3 Cir., 126 F.2d 689, 694; Manchester Board & Paper Co. v. Commissioner of Internal Revenue, 4 Cir., 89 F.2d 315, 317. Cf. Webre Steib Co. v. Commissioner of Internal Revenue, 324 U.S. 164, 170, 172, 65 S.Ct. 578, 89 L.Ed. 819.

 Whitney v. Commissioner of Internal Revenue, 3 Cir., 73 F.2d 589, 591; Nichols v. Commissioner of Internal Revenue, 3 Cir., 44 F.2d 157, 159; Andrews v. Commissioner of Internal Revenue, 2 Cir., 135 F.2d 314, 318, 319; J. M. Perry & Co. v. Commissioner of Internal Revenue, 9 Cir., 120 F.2d 123, 124.

 Commissioner of Internal Revenue v. Court Holding Co., 324 U.S. 331, 65 S. Ct. 707, 89 L.Ed. 981.

 Hatch v. Morosco Holding Co., 2 Cir., 50 F.2d 138, 139.