Court Opinion

ID: 4493094
Source: CourtListenerOpinion
Date Created: 2020-01-17 22:03:46.015368+00
Date Added: 2024-06-11T15:03:59.593577
License: Public Domain

Murdock,
dissenting: I see neither statutory nor factual authority for the deductions allowed in this case on account of the “A” allotment of stock. The prevailing opinion attempts to justify the accrual of definite amounts on the theory that certain employees on January 2 and on April 12, 1926, purchased certain stock. An accrual must be made as of the time when the facts determinative of the obligation and its amount become fixed. How could this corporation accrue any amount until there was an agreement, which not only bound it to deliver a definite number of shares to a certain employee, but bound some employee to accept and pay for those shares ? The findings do not show any such agreement prior to June 1, 1926. Therefore, accruals based on fair market value of stock on January 2 and April 12 are clearly improper. But aside from this, the deduction is wrong in principle. See the dissenting opinions in Haslcell & Barker Car Co., 9 B.T.A. 1087. Other stockholders of the parent are the only ones adversely affected by the issuance of additional stock for less than its fair market value. Thereafter they have to be content with a smaller share of corporate distributions. But the income of the issuing corporation certainly is not reduced. Its - assets are not reduced. The transaction is unique and is not covered by any provision of the statute allowing deductions to a corporation.
Sternhagen, McMai-ioN, and Goodrich agree with this dissent.