Court Opinion

ID: 4475142
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:11:21.75004+00
Date Added: 2024-06-11T15:04:27.300373
License: Public Domain

Johnson, J., dissenting: The majority’s decision that petitioner was not an acquiring corporation is based on a recognition of the $50,000 deposited to petitioner’s credit by Burton on June 4, 1940, as a bona fide payment for petitioner’s shares. Petitioner had not been organized at that time, and the reason for the deposit was compliance with incorporation formalities. The very next day after the shares were issued, $49,000 was promptly withdrawn from the account, and petitioner was left with only $1,000 of nominal assets until July 1, 1940, when all the proprietorship’s cash and assets were recorded on petitioner’s books as transferred to petitioner. The majority’s view is well illustrated by the statement in the opinion: * * * Nowhere is it shown that there was any preconceived plan that in the beginning the transactions were to be carried out in such a manner that the new corporation was to have received only the assets of the sole proprietorship in exchange for its stock, $1,000 in cash as described above being excepted. * * * In my opinion the evidence is wholly incompatible with any other view. Burton’s only intention was to incorporate his automobile business; all the assets of that business were transferred to petitioner, and all of petitioner’s stock was issued to him or his nominees within a month after he filed application to organize a corporation to engage in the automobile business. To hold, as the majority does, that the $50,000 deposit, so soon withdrawn, was intended as a substantive payment for shares and that the asset transfer, following within a few days, was not part of a preconceived plan strains credulity. After organization, petitioner had the use of $49,000 of the $50,000 for only one day. It did no business with the money; it did not invest it in assets. Burton simply withdrew it, having fulfilled a perfunctory requirement of incorporation. I fail to see any substance in such act; substance inhered only in the asset-transfer, and in my view petitioner’s shares were in reality issued for the assets. Arundell, J., agrees with this dissent.