Forstner Chain Corp. v. Commissioner

45 B.T.A. 19

• Court: United States Board of Tax Appeals
• Decided: September 4, 1941
• Docket: Docket No. 104998
• Status: Published

Opinion

OPINION.

Smith:

The petitioner seeks a dividends paid credit pursuant to the provisions of section 27 (f) of the Revenue Act of 1936. This section provides:

(f) Distributions in Liquidation. — In the case of amounts distributed in liquidation the part of such distribution which is properly chargeable to the earnings or profits accumulated after February 28, 1913, shall, for the purposes of computing the dividends paid credit under this section, be treated as a taxable dividend paid.

Section 27 (g) provides, however:

(g) Preferential Dividends. — No dividends paid credit shall be allowed with respect to any distribution unless the distribution is pro rata, equal in amount, and with no preference to any share of stock as compared with other shares of the same class.

Respondent contends that the credit claimed is not allowable because the distribution involved was preferential within the meaning of section 27 (g). The petitioner contends that the; distribution was not preferential because of the waiver of rights by the stockholders to whom no distribution was made. In May Hosiery Mills, Inc., 42 B. T. A. 646; affd., 123 Fed. (2d) 858, section 27 (g) was held to be a limitation upon section 27 (f). Upon the authority of that case, we must sustain the respondent in his disallowance of the dividends paid credit to the petitioner in this1 proceeding. Cf. Monte Glove Co., 44 B. T. A. 539.

Decision will be entered for the respondent.