Court Opinion

ID: 6886954
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:31:00.762999+00
Date Added: 2024-06-11T16:05:44.323162
License: Public Domain

WALLER, Circuit Judge
(dissenting).
The exchange of stock was not made by the trustee with any idea of aiding the Coca-Cola International Corporation to liquidate but was done solely for the purpose of enabling the trustee to comply with the requirements of the Georgia law. In substance, the trustee, desiring to sell International stock, and finding that it could not, swapped it for something it could sell, and thereby disposed of a capital asset. The fact that Coca-Cola International was liquidating was purely incidental. The transaction, in fact, purpose, and substance, was a sale of a capital asset and not an exchange in aid of, or in contemplation of, liquidation. The entire purpose of the transaction was to permit the trustee to dispose of a capital asset which it was illegal for it to hold under the Georgia law. I am unwilling to substitute form for substance when to do so penalizes one who is merely undertaking in good faith to comply with the state law. The Coca-Cola common stock was bought by the agent, in the name of the agent, and sold by the agent, all as a means of selling Coca-Cola International stock. It was illegal, under the Georgia law, for the trustee to buy the Coca-Cola common stock to the same extent as it was illegal for it to hold the International stock. The purchase by the trustee of the Coca-Cola stock appears to be void as against the public policy of the State of Georgia. Certainly the trustee was not undertaking to buy Coca-Cola common stock. It was undertaking to sell Coca-Cola International stock. I consider the acquisition of the Coca-Cola common stock an incident only to the sale of the Coca-Cola International stock — the means to an end.
The case is distinguishable from Dodd v. Commissioner, 5 Cir., 131 F.2d 382, because in that case Dodd “voluntarily” entered into the agreement. In the instant case the taxpayer was compelled by Georgia law to sell. Dodd was not required by law to sell. In the Dodd case the Coca-Cola common stock was in turn sold to the Coca-Cola Company and the opinion states that Dodd “intended and expected that this would be done.”
In Woodruff v. Commissioner, 5 Cir., 131 F.2d 429, 430, there was no element of legal compulsion involved. The taxpayer dealt directly with International and received Coca-Cola stock. The exchange of stock and the disposition of the Coca-Cola common stock were not parts of a single transaction as in the present case. The Court in the Woodruff case, however, used language which I thoroughly approve. It said:
“It is true that the tax consequences of a transaction depend upon the substance of the transaction rather than the mechanics by which it is executed * *
The Court added that it is also true that if a taxpayer has two legal methods by which he may attain a desired result, the method pursued is determinative for tax purposes. In the present case the taxpayer apparently had no choice. It was required by the Georgia law to sell and the only way he could bring it about was the method pursued.
It clearly seems to me that this is a case in which we should look to the “substance of the transaction rather than the mechanics by which it was executed”.