Court Opinion

ID: 4489078
Source: CourtListenerOpinion
Date Created: 2020-01-17 22:01:39.276646+00
Date Added: 2024-06-11T15:03:53.676089
License: Public Domain

MillieeN,
dissenting: While I dissent on the merits of the tax liability determined, I will confine myself to the phase of the case as it relates to section 280. I have fully set forth my views on the unconstitutionality and the unworkability of section 280 in my dissenting opinion in Henry Cappellini et al., 14 B. T. A. 1269, and will not repeat what I there said. I will now attempt to apply the views there set forth to the facts of these proceedings. The conclusions reached in the majority opinion serve to confirm me in the views reached in that dissenting opinion. We have before us two corporations which, so far as the record discloses, owe the Government no taxes but each of which has received a part of the assets of a corporation which does owe a deficiency in tax — a deficiency ascertained subsequent to the distribution of its assets. One of the petitioning corporations is found not to be liable and in this result I concur. The other petitioner is held liable for the deficiency but its liability is limited to the value of the assets received by it in the liquidation— this irrespective of what was received by the other stockholders and irrespective of the circumstances and conditions which existed at the time the distribution was made.
The majority opinion is based upon Hatch v. Dana, 101 U. S. 205. That case involved the direct liability of stockholders upon stock subscriptions, whereas here the liability is, as I pointed out in my dissenting opinion in the Gafféllini case the pure creation of equity jurisprudence, enforceable only by a court of equity, and then upon equitable principles. The majority opinion overlooks the fact that in the Hatch case the Supreme Court took pains to point out that the appellants could have moved in that case for a receiver or that they could have filed a cross bill, obtained discovery, and enforced contribution. It is needless to point out that the Board can afford petitioners none of these remedies.
Since it appears the Board is now to resolve itself into a court of equity, it should at least attempt, as far as lies within its power, to administer this purely equitable doctrine upon equitable principles. In doing this I am of opinion that we should follow the Circuit *1183Court of Appeals for the Eighth Circuit in the rules laid down in Updike v. United States, 8 Fed. (2d) 912, and United States v. Armstrong, 26 Fed. (2d) 227, both of which involved deficiencies in tax which were ascertained and determined subsequent to the distribution of the assets of the taxpayer. It was held in these cases, and especially in the Armstrong case, that the tax liability of the taxpayer should be apportioned among the stockholders in the proportion which the amount of assets received by each bore to the amount of assets distributed to all. This is in accord with«equitable principles and I believe the same rule should be applied in these proceedings. If the Board so decided the matter, it would be necessary to grant certain equitable relief or have the power to do so as a condition precedent to the application of the rule laid down in the two cases just cited.
LansdoN, Trussell, and MoRRis concur in that part of Milliken’s dissenting opinion relating to the extent of the liability of the transferees.