Richardson v. Conway
This text of 49 F.2d 554 (Richardson v. Conway) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
Appellant Jessie P. Richardson, residing in Wisconsin, and owning all the outstanding shares of the Waupaca Electric Service & Railway Company, a Wisconsin public utility corporation, on December 10, 1925, entered into an agreement in writing with the Wisconsin Valley Company reciting sale and transfer to the latter of 101 shares of the stock for a paid consideration of $36,791.27, and agreeing to sell to the Wisconsin Valley Company, and the latter agreeing to buy, the remaining 400 shares in eight blocks, each of 50l shares, the first on May 19, 1926, and the others at intervals of six months thereafter, on payment to appellants of $18,213.50 for each block delivered. The parts of the contract here material are quoted in the margin.1 The Wisconsin taxing authorities, Treating the transaction as completed in 1925, assessed as income for that year, for state income tax purposes, the profit to appellant on the entire 501 shares.
Appellants, having removed from the state, brought suit in the federal District Court to restrain certification of the tax on such of the income as is represented by the profit upon the 400 shares. An answer was filed, and each party moved for decree on bill and answer. The court decreed dismissal on the merits. ■
The sole question is whether, as to the 400 shares* the profit to- appellant thereon was income taxable in 1925 for state income tax.
If decisions of the Supreme Court of Wisconsin construing the statue have application to the question here, we must adopt such construction. In State ex rel. Waldheim & Co. v. Wis. Tax Comm., 187 Wis. 539, 204 N. W. 481, 482, it was held that the entire profits on installment contracts were taxable in the year when the contract was entered into. It was stated:
“This profit is not money, but it may he converted into money. Such secured contracts have a value and they may be converted into money. It is not essential that they he received at the teller’s window for credit on the bank balance in order that they shall he convertible into money.”
To like general effect is Motors Acceptance Co. v. Wis. Tax Comm., 193 Wis. 41, 214 N. W. 64, 65, where the court said:
“Income for the purposes of taxation need not he money which can he passed through the teller’s window or profits which can be distributed to stockholders in cash. Income may be either money or that which is convertible into money. Income Tax Cases, 148 Wis. 456, [513, 134 N. W. 673, 135 N. W. 164].”
While this is not an installment contract as that term is generally understood, and as [556]*556was the fact in some of the adjudicated eases, we can see no logical reason why the principle announced in the above cases is not here applicable. The contract here is, in a sense, one embodiment of a series of contracts for periodic sale, purchase, and delivery of a specific number of shares at a definite price to be. paid at specific times. As to the 101 shares, the contract recites the payment of the price and the delivery. Then follow provisions for the sale and purchase of eight blocks of 50 shares each, at the fixed price, and for delivery of the stock certificates in escrow, to be paid for by the purchaser and taken by it as agreed, and for interest on deferred payments at 6 per cent, per annum from date of contract.
It appears from the pleadings that the certificates of stock were delivered to the escrow, and contemporaneously with the execution of the contract all the prpperty and assets of the Waupaca Company were turned over to the Wisconsin Company, and that the latter concern was abundantly able to meet the contract obligations on its part to be performed.
As in installment contracts generally, there was here no independent security or notes to manifest or secure the maturing payments. But the property of the Waupaca Company which thus passed to the buyer, and which presumably had value which bore a fair relation to the purchase price of the entire corporate stock, augmented tlie already abundant responsibility of the purchaser, although no specific lien was granted appellant save that the property of a corporation; is primarily liable for its obligations. It may be said that the vendor’s security afforded by the escrow arrangement would, in general, bé better than in a conditional sale installment contract where possession of the article sold goes to the vendee, with title remaining in the vendor until all payments have been made.
In State ex rel. Howe v. Lee, 172 Wis. 381, 178 N. W. 471, 473, certain stocks taken in exchange for other property were included in estimating the profits of the transaction, which the taxpayer contended could not be considered until realized upon. The court said:
“In the ease of the sale of the property, the fact that other property is taken in part payment does not change the rule as to profits subject to an income tax. If the property taken in exchange is valued at a price that substantially corresponds to its market value, such agreed price will govern. If it be not valued, then its market value will control. Here there' is no evidence to show that General Motors Corporation preferred stock was worth less than par, and for the purpose of income taxation it will, in the absence of other evidence, be deemed worth par. Hence the sale for taxing purposes is equivalent to a cash sale.”
If this contract, whereby the Wisconsin Company unqualifiedly bound itself to make the specified payments, had a definite realizable' value, we are satisfied that under the law of Wisconsin the profit upon the transaction was taxable income in 1925.
The tax commission found, in substance, that the purchaser was responsible, and that the contract would have been convertible into cash by appellant, and that the transaction was in essence the same as if the cash had been paid appellant in 1925 and invested elsewhere at 6 per cent, interest.
There is nothing in the record which conflicts with these findings of the tax commission, and its findings of fact are presumably correct. Peninsular Power Co. v. Wis. Tax. Comm., 195 Wis. 231, 218 N. W. 371; State ex rel. Howe v. Lee, 172 Wis. 381, 178 N. W. 471; Niles Bement Pond Co. v. United States, 281 U. S. 357, 50 S. Ct. 251, 74 L. Ed. 901.
The decree of the District Court is affirmed.
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49 F.2d 554, 1931 U.S. App. LEXIS 3221, Counsel Stack Legal Research, https://law.counselstack.com/opinion/richardson-v-conway-ca7-1931.