Court Opinion

ID: 4479742
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:13:50.113358+00
Date Added: 2024-06-11T15:03:33.018839
License: Public Domain

Smith, /., dissenting: The distributions made by C. E. Mills Oil Co. to its stockholders in years prior to 1938 were not “liquidating dividends” because they were not in redemption of shares of stock of the company. They were ordinary dividends and the stockholders receiving them were taxable upon net earnings of the corporation included in such distributions. The fact that the distributions were in excess of the earnings available for distribution did not make them liquidating dividends. It was not until the company received final payment under the contract of May 23, 1930, from the Pure Oil Co. that a plan was formulated for the liquidation of the corporation. It seems to me that the formulation of that plan was not affected by anything that went before. Section 115 (c) of the Internal Revenue Code was intended to place stockholders receiving distributions in complete liquidation in the same position as stockholders who sold their shares of stock. It can not be doubted that if in 1938, 1939, or 1940 the petitioners had sold or exchanged their shares of stock for amounts substantially equivalent to the amounts of distributions which would be made by the Mills Oil Co., the gains resulting from such sales or exchanges would have been long term capital gains and that the petitioners would be taxable upon only 50 percent of such gains. The petitioners claim the same rights which they would have if they had sold their stock. I think that the claim is valid. Abundell, J., agrees with this dissent.