Court Opinion

ID: 6869623
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:59:07.893262+00
Date Added: 2024-06-11T16:05:22.928127
License: Public Domain

WOODROUGH Circuit Judge
(dissenting).
' It appears that in 1930 the Central Transfer Company of Missouri sold out its business and a part of its assets at a profit, went into liquidation, and distributed the gain to its stockholders. They do not deny that there was a profit, nor that they got it. They resist paying a tax because they claim that the form the sale took worked a tax exemption for them.
The sale was effected between corporations and the form was not as simple as a sale over the counter in a grocery store, but the purpose and substance were no different. A corporation was organized under the laws of Delaware and a contract entered into in which the new corporation was called the purchaser and the Missouri Company the seller, and it was provided that the seller should transfer the property in question to the purchaser and receive a minority of the purchaser’s stock (4,900 out of 10,000 shares) and the majority stockholders of the purchaser would obligate themselves to buy the minority shares on demand at $20 per share. All of which was done and the -Missouri Company’s stockholders received the minority stock of the new corporation and the majority Stockholders became obligated, when called on, to buy it for $20 per share.
It is contended that in carrying out the plan the property of the seller was transferred to the purchaser and the minority stock was issued therefor a little while before the purchaser’s majority stock was issued, and it is argued that the minority stockholders could have controlled the purchaser corporation in that interim. So that an exempt “reorganization” could be spelled out of that step of the sale transaction.
There was no evidence that the seller did transfer its property or get its minority stock before the majority stockholders of the purchaser got theirs, or that the new
corporation ever functioned under the control of the minority stockholders,3 but such incidents of consummating the deal, if they had been shown, would be immaterial. There was no idea to reorganize the Missouri Company into another company that would carry on the same business with the same stockholders, but with less than half the capital stock issued to them — that was not an end that anybody wanted to work out. The transaction as a whole was intended to be and was a sale that was intended to and did carry a profit to the seller. The component steps of the sale transaction should not be segregated and considered as though there were separate transactions. To try to do so merely distorts the picture of what the the deal was, upon which the minds of the parties met, and which netted the taxpayers’ gains.
I see no reason to relieve these taxpayers from the common lot of fellow citizens who have to pay taxes when they sell their property at a profit.

 “The date of the actual transfer of such assets is not disclosed. Nor are we informed as to the date of the issuance of the 4,900 shares of the Delaware Company stock to the Missouri Company, * * “ * * » the Missouri Company or its stockholders were not in control of the Delaware Company immediately after the transfer of the property involved. * * * ” Opinion of the Board of Tax Appeals.