Crane-Johnson Co. v. Helvering

Because of a previously existing deficit, petitioner corporation was prohibited by state law 1 from distributing as dividends its profits earned in 1936. Notwithstanding this state prohibition, the Commissioner held respondent liable under the 1936 Revenue Act 2 for surtax on undistributed profits. The Board of Tax Appeals sustained the Commissioner, 3 and the Circuit Court of Appeals affirmed. 4 On a similar state of facts the Court of Appeals for the Ninth Circuit held undistributed profits exempt from surtax. 5 We granted certiorari in both cases to resolve this conflict. 6 The legal…