Adams v. Commissioner
United States Tax Court
Debentures distributed to petitioner by a corporation of which he was the principal common stockholder in connection with elimination of old common stock and issuance of new without par value, held, on facts failing to show corporate business purpose for the transaction, to constitute a taxable dividend to the extent of their value and of the corporation's accumulated earnings, notwithstanding that surplus account remained unchanged on corporate books.
1DissentKerN, J.
A reduction in the tax liability of a corporation may constitute a legitimate business purpose of a reorganization under the statute. Clarence J. Schoo, 47 B. T. A. 459. See also C. A. Monroe, 39 B. T. A. 685; Tower v. Commissioner, 148 Fed. (2d) 388. A reduction in the corporation’s liability for dividends or interest also constitutes a legitimate business purpose. Annis Furs, Inc., 2 T. C. 1096. However, the majority opinion holds that, where the reduction in the corporation’s tax liability is accompanied by an increase in liability for interest in an equal or greater amount, the reduction…
2Cases cited1 opinion
- Annis Furs, Inc. v. CommissionerUnited States Tax Court · 1943