Court Opinion

ID: 4492724
Source: CourtListenerOpinion
Date Created: 2020-01-17 22:03:34.126101+00
Date Added: 2024-06-11T15:03:58.277788
License: Public Domain

Smith,
dissenting: The transactions here involved were not sales, but in substance the “ redemption in * * * part ” of the stock distributed as a dividend by the corporation in 1923. At that time, the corporation had accumulated profits in excess of the amount of the stock dividend; instead of a cash dividend it declared the stock dividend, retaining' the assets reflected in its surplus account, and provided for the redemption of the preferred stock from future earnings set aside for that purpose. Section 201 (g) of the 1926 Act is not ambiguous and does not prescribe the method of redemption ; the only restriction being that the redemption be treated as a taxable dividend to the extent of earnings accumulated since March 1, 1913. This stock was redeemed out of current earnings. I do not agree that the petitioners sold their stock to the corporation; but in any event, what is the basis upon which to compute their gain ? I think the amount received by these petitioners was “ essentially equivalent to the distribution of a taxable dividend ” and should be taxed as such.