Court Opinion

ID: 5318522
Source: CourtListenerOpinion
Date Created: 2022-01-08 04:21:31.797601+00
Date Added: 2024-06-11T08:29:17.986279
License: Public Domain

Hinman, J.
(dissenting). It is quite clear to me that the realty corporation does not escape taxation under article 9-A of the Tax Law by the exemption declared in the case of certain realty corporations. An exemption provision in a taxing statute must be construed strictly against the party urging the exemption. In this instance, among the classes of corporations declared exempt from *63taxation under said article 9-A are corporations “ wholly engaged in the purchase and sale of, and holding title to, real estate ” for themselves. (Tax Law, § 210, as amd. by Laws of 1920, chap. 640.) This subsidiary realty corporation was the owner of a large amount of personal property (which it owned and rented in addition to building and fixtures), consisting of laboratory equipment, motion picture machines, printing machines and development machinery. In the tax report of the realty corporation, filed by it under Tax Law, section 182 (Respondent’s Exhibit 25), that company gave average value of its personal property at $140,386.81. It cannot be said that a corporation which owns and rents such a large amount of valuable personal property is “ wholly engaged in the purchase and sale of, and holding title to, real estate.” For that reason I vote to confirm the determination of the Commission on that phase of the case. It was proper to consolidate the subsidiary realty corporation with the parent because the exemption as a realty corporation as defined in said section 210 of the Tax Law cannot be claimed.
Moreover, I think the profits of the petitioner’s foreign subsidiaries, entered upon petitioner’s books as loans, were properly treated as dividends and properly included in the net income used to measure the tax. There is no proof that those so-called loans were evidenced by notes or other writing, that there was any agreement that they should bear interest, that there was any agreement to repay them or, if so, at any definite time. In fact counsel for petitioner frankly admitted upon the hearing that the earnings of the subsidiaries might never be distributed. These so-called loans seem like mere bookkeeping devices to evade taxation, or so the Commission might conclude in the absence of a clearer showing that they were not actual distributions or dividends. (Christopher v. Commissioner of Internal Revenue, 13 B. T. A. 729; Appeal of Walle & Co., Ltd., 1 id. 1064; McLoon Co. v. Commissioner of Internal Revenue, 11 id. 816; Appeal of Bockius Realty Co., 1 id. 939; Chattanooga Savings Bank v. Brewer, 17 F. [2d] 79; Rockefeller v. United States, 257 U. S. 176; Southern Pacific Co. v. Lowe, 247 id. 330.)
I, therefore, dissent and vote to confirm the determination.
Determination annulled, with fifty dollars costs and disbursements, and matter remitted to State Tax Commission to make a revision of the taxes in accordance with the opinion.