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Douglas v. Edwards

287 F. 919, 2 A.F.T.R. (P-H) 1890, 1922 U.S. Dist. LEXIS 1090
CourtDistrict Court, S.D. New York
DecidedDecember 18, 1922
StatusPublished
Cited by5 cases

This text of 287 F. 919 (Douglas v. Edwards) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Douglas v. Edwards, 287 F. 919, 2 A.F.T.R. (P-H) 1890, 1922 U.S. Dist. LEXIS 1090 (S.D.N.Y. 1922).

Opinion

MACK, Circuit Judge.

This suit is brought by the executors of James Douglas, deceased, to recover the sum of $173,579.72, assessed as income tax against funds received by the decedent as part of so-called “depletion distributions” made by the Phelps Dodge Corporation to its shareholders in September and December, 1917. It is the contention of the plaintiffs that these distributions were not dividends in the ordinary course of the business, but were liquidating dividends specifically made from a depletion reserve set up by the corporation under the direction, of, and in accordance with, the regulations of the Treasury' Department, and therefore constituted return of capital to its stockholders. The solicitor for the Commissioner of Internal Revenue reiected this contention, on the ground that under section 31 (b) of the Revenue Act of 1916, added by section 1211 of the Act of October 3, 1917 (Comp. St. 1918, § 6336z), a corporation could not declare a dividend out of profits earned-prior to March 1, 1913, or from a depletion reserve — and thereby enable the recipients to escape the tax thereon — at a time when the company had earnings in its surplus fund which accrued to it on or after March 1, 1913, from which the dividend or dividends could have been paid, in any event not without a reduction of its capital stock.

Plaintiff’s Exhibit D, which is annexed hereto as Schedule I,, gives a summary of the changes in the financial condition of the Phelps Dodge Corporation during the period of 1912-1917;

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Bluebook (online)
287 F. 919, 2 A.F.T.R. (P-H) 1890, 1922 U.S. Dist. LEXIS 1090, Counsel Stack Legal Research, https://law.counselstack.com/opinion/douglas-v-edwards-nysd-1922.