Edison Sec. Corp. v. Commissioner

Board of Tax Appeals

Edison Sec. Corp. v. Commissioner

34 B.T.A. 1188, 1936 BTA LEXIS 588

CourtUnited States Board of Tax Appeals

DecidedOctober 21, 1936

DocketDocket No. 52662.

StatusPublished

Cited by2 cases

This text of 34 B.T.A. 1188 (Edison Sec. Corp. v. Commissioner) is published on Counsel Stack Legal Research, covering United States Board of Tax Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Edison Sec. Corp. v. Commissioner, 34 B.T.A. 1188, 1936 BTA LEXIS 588 (bta 1936).

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Opinion

[1189]*1189OPINION.

The earlier opinion proceeded upon the view that the plan of statutory reorganization which was ultimately carried through first became definitive on' February 4, 1926, when the formal corporate [1190]*1190resolution of the directors of Republic was adopted, there being inadequate evidence in the record as then made to establish that the plan was authoritatively adopted at an earlier date. The Circuit Court of Appeals, however, recognizing that the second transaction was so near in point of time and so similar in purpose to the third that there was ground for entertaining the belief that it too was a part of the plan of ultimate reorganization, remanded the proceeding for an ascertainment of the facts, in order that an accurate determination in this respect could be made. Thereupon the parties presented a detailed stipulation of facts showing the evidence to be found in the corporate books and records, and the petitioner supplemented this stipulation with the oral testimony of one of the men who participated in the series of conferences. From this evidence, it is unmistakable that the agreement to carry out the statutory reorganization which was ultimately consummated was reached on January 29, although not formally expressed in corporate resolution until February 4. The exchange of February 3 was not made, as the Commissioner contends, as an added step in the earlier negotiations of 1925, but was only made because on January 29 the authorized representatives of all parties had reached such an agreement as provided satisfactorily for the rights of the preferred shareholders represented by Eastman, Dillon & Co., together with other details which had theretofore not been provided for. Thus the transaction of February 3 stands in the same case as the later transactions which have heretofore been held to be part of a plan of statutory reorganization.

It results that the exchange on February 3 by petitioner of 5,753 shares of Republic common for 11,506 shares of Penn-Ohio common and $143,825 of Penn-Ohio bonds was a transaction pursuant to a plan of reorganization within the meaning of the statute, and is not to be treated as a nonreorganization exchange as held in the prior opinion of the Board.

In its opinion, the court required that the liquidation dividend of $7,500 in 1926 and the net loss of $51,950.73 in 1925 should be properly considered. These have been covered by a stipulation of the parties that the petitioner is entitled to no such net loss deduction and that the distribution of $7,500 is not to be included in petitioner’s 1926 income. In accordance with this stipulation and with' the holding of the Board upon the matter in issue,

Judgment will be entered vmder Ruis 50.

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[1189]*1189OPINION.

The earlier opinion proceeded upon the view that the plan of statutory reorganization which was ultimately carried through first became definitive on' February 4, 1926, when the formal corporate [1190]*1190resolution of the directors of Republic was adopted, there being inadequate evidence in the record as then made to establish that the plan was authoritatively adopted at an earlier date. The Circuit Court of Appeals, however, recognizing that the second transaction was so near in point of time and so similar in purpose to the third that there was ground for entertaining the belief that it too was a part of the plan of ultimate reorganization, remanded the proceeding for an ascertainment of the facts, in order that an accurate determination in this respect could be made. Thereupon the parties presented a detailed stipulation of facts showing the evidence to be found in the corporate books and records, and the petitioner supplemented this stipulation with the oral testimony of one of the men who participated in the series of conferences. From this evidence, it is unmistakable that the agreement to carry out the statutory reorganization which was ultimately consummated was reached on January 29, although not formally expressed in corporate resolution until February 4. The exchange of February 3 was not made, as the Commissioner contends, as an added step in the earlier negotiations of 1925, but was only made because on January 29 the authorized representatives of all parties had reached such an agreement as provided satisfactorily for the rights of the preferred shareholders represented by Eastman, Dillon & Co., together with other details which had theretofore not been provided for. Thus the transaction of February 3 stands in the same case as the later transactions which have heretofore been held to be part of a plan of statutory reorganization.

It results that the exchange on February 3 by petitioner of 5,753 shares of Republic common for 11,506 shares of Penn-Ohio common and $143,825 of Penn-Ohio bonds was a transaction pursuant to a plan of reorganization within the meaning of the statute, and is not to be treated as a nonreorganization exchange as held in the prior opinion of the Board.

In its opinion, the court required that the liquidation dividend of $7,500 in 1926 and the net loss of $51,950.73 in 1925 should be properly considered. These have been covered by a stipulation of the parties that the petitioner is entitled to no such net loss deduction and that the distribution of $7,500 is not to be included in petitioner’s 1926 income. In accordance with this stipulation and with' the holding of the Board upon the matter in issue,

Judgment will be entered vmder Ruis 50.

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34 B.T.A. 1188, 1936 BTA LEXIS 588, Counsel Stack Legal Research, https://law.counselstack.com/opinion/edison-sec-corp-v-commissioner-bta-1936.

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