Oswego Falls Corp. v. Commissioner
United States Board of Tax Appeals
1. Petitioner, during the taxable year 1936, was obligated under a mortgage indenture securing its bond issue to pay or declare no dividends on its second preferred or common stock if such action would reduce its net current assets below $1,000,000. Held, that payment of cash dividends in excess of the amount actually paid by petitioner in 1936 would have so reduced the net current assets in violation of the mortgage indenture; held, further, that under the established…
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1. Petitioner, during the taxable year 1936, was obligated under a mortgage indenture securing its bond issue to pay or declare no dividends on its second preferred or common stock if such action would reduce its net current assets below $1,000,000. Held, that payment of cash dividends in excess of the amount actually paid by petitioner in 1936 would have so reduced the net current assets in violation of the mortgage indenture; held, further, that under the established facts, petitioner could have paid common stock dividends, only, on its outstanding common stock which would not have…
1Opinion of the Court
*806OPINION.
Leech :
The first issue is whether petitioner is entitled to a credit under section 26 (c) (1) of the Revenue Act of 19361 by reason of a provision of a written contract executed prior to May 1, 1936, expressly dealing with and restricting the payment of dividends. Petitioner relies on the mortgage indenture executed July 1, 1926, as a contract which operates as a restriction on the payment of dividends within the meaning of the statutory provision. It contends that section 38 of the mortgage, providing that “no dividend shall be paid or declared upon or set apart for the Preferred…
2Cited by3 opinions
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- Ncnb Corporation, a North Carolina Corporation North Carolina National Bank v. United StatesCourt of Appeals for the Fourth Circuit · 1981
- Oswego Falls Corp. v. CommissionerUnited States Board of Tax Appeals · 1942