261 F. 339 | 3rd Cir. | 1919
The defendant in error (the plaintiff below) sued to recover certain moneys which it claims were due from the plaintiff in error by way of taxes under the Corporation Excise Tax Law of August S, 1909 (36 Stat. 112, c. 6, § 38), and recovered a judgment for the full amount claimed. There was no conflict in the evidence, and the facts, as distinguished from the inferences which it is claimed may be drawn therefrom, are not in dispute.
It appears that during the year 1909 the defendant purchased certain properties, the legal title to which was taken in the name of its president, as trustee. Later in the same year, pursuant to a plan for increasing the capital stock of the defendant, these properties were conveyed by the trustee to a corporation known as the Cement Manufacturing Company, which had been formed for the express purpose of thus acquiring and using them in carrying out the recapitalization scheme. The consideration of the conveyance was the .issuance by the latter company to the trustee of its entire capital stock, except a few shares necessary, under the laws of the state where the company was incorporated, to be held by the directors. The stock thus issued to the trustee was immediately transferred by him to the defendant, which in turn distributed it among its stockholders, share for share. Thereupon, in furtherance of the recapitalization plan, a merger was effected between the defendant and the Cement Manufacturing Company. For purposes of the merger, the value of properties so conveyed to the Cement Manufacturing Company (which constituted all of its assets) was fixed at the same figure as that at which the, trustee had conveyed them to that company; also, before the stock was distributed among the defendant's stockholders, it was formally valued by its directors at par. The par value of such stock greatly exceeded the price at which, the property had originally been purchased by the defendant. The defendant did not include' as income in the tax return, which it was required by law to make for that year, the apparent profit resulting from the difference between, the price which it had originally paid for the properties and the price at which it had ostensibly sold them to the Cement Manufacturing Company. The government, however, when it learned of the transaction, or a part of it, took the position that the alleged profit — both the purchase and sale having taken place within the tax year of 1909 —was taxable income of that year under the before-mentioned Act (Doyle v. Mitchell Bros. Co., 247 U. S. 179, 38 Sup. Ct. 467, 62 L. Ed. 1054; Hays v. Gauley Mt. Coal Co., 247 U. S. 189, 38 Sup. Ct. 470, 62 L. Ed. 1061) and thereupon brought this action to recover the tax thereon.
In this situation, it was not permissible to consider only a part of the evidence, separate from that which supplemented and explained it, or to accept the former and discard the latter. It was necessary that it be taken as a whole. When thus considered, it was susceptible of only one inference, viz. that the defendant had in reality made no profit. Accordingly there was no question of fact for the jury to pass upon. We think, therefore, that the defendant’s request for binding instructions should have been granted, and in declining to direct a verdict for the plaintiff the trial court committed error. It is proper to observe that, when the case was before the learned trial judge on a motion for a new trial, he entertained the same views as we have ¿above expressed; but anticipating that, irrespective of whatever deci
The judgment is reversed, and a new trial granted.