*1 brought judgment Court is the District arising Court’s
about error
charge Levy after which occurred
changed
plea
and did not affect him
Fox,
way.
Cf.
United States
317 U.S.
certiorari denied
63 S.Ct.
The the Dis- the case remanded to
reversed and appeal a new
trict Court for trial. Levy pros-
to Sol for lack is dismissed
ecution.
DE GUIRE v. HIGGINS. 150, Docket
No. Appeals,
Circuit Court Second Circuit. Feb. Rudykoff Samuel X. McGo- F. John
hey, Atty., City, both of York S. New U. appellant. City McGrath, New York P. John (Denis Hurley, Brooklyn, Y., M. N. appellee. counsel), for HAND, SWAN, CLARK, Bеfore L. Judges. Circuit HAND, Judge. L. Circuit appeals judgment from The Collector against him in action to recover income unlawfully plain- collected taxes question tiff’s is whether testator. *2 922 31, 1937, on the directors div- December two of certain properly assessed company by nominated DeGuire, the should be idends as income to on shares by D one Moore and Bosworth and them, or wheth- Mrs. testator, he received when F and Thereafter Mrs. Moore as decreas- Guire. they er must be treated persons as the worth would vote such fоr capital gain when a ing the “basis” of >' ca, as nominate. eventually facts tor DeGuire should sold. The shares should be increased; Mrs. they im- tal stock was to be and, are as stipulated so far were to were to be entitled DeGuire, Mrs. Moore and Bosworth as follows. portant, are upon the bank to- their. while Bosworth, vote certificates Moore, Ludlow were and Lee them; were all the shares held notes all the of owners of gether the paid no declared unless in all. dividend should be Company 10,000 Brake Ajax Hand — 4000, approved. should have No officer owned DeGuire Moore each and Mrs. DeGuire them among salary, should name a and DeGuire were divided and the other concluded with fol- all. The contract On December and Bosworth, Lee Ludlow. may De- which Moore, lowing and clauses. dividends Bosworth “All 1935,
31, Mrs. agreement, paid, of this during which Mrs. life into be * * * a contract entered Guire recipient by the sell their shall be credited agreed to Bosworth and Moore already upon principal interest of had thereof and (Lee DeGuire. shares tо December.) to thereafter of next one of the notes 2nd said his on the sell agreed to agreed and due. It understood Mrs. Moore become to between agreed The terms personally lia- apply “shall not be to DeGuire taken to that” 'be DeGuire and or agreement or otherwise follows. DeGuire ble under this They were other two. price any notes, of and that the upon of said $43,904 the total of paid in cash contract, remedy Mrs. “in the event of” Moore execution $96,000 at the any pay “to of said failure of” DeGuire notes, all promissory four executed and thereon, interest shall accruing notes and $17,365, for 31, 1935: December dated the certifi- re-delivery of right to the be the 31, 1936; for two December payable on there- of stock attached 1937; cate or certifiсates 31, December on payable $8,682each, payable on to.” $17,367, for and fourth payable also 31, All were cember company dividend declared a option, and interest maker’s earlier first, 1936, per pay- cent on December seven annum, payable per per cent at five ran 15th, day on the on executed able and attach semi-annually. agreed Moore to Mrs. cheque to for a the order Mrs. Moore note, shares first a certificate to $28,000 dividend on 4000 shares. —the each shares to a certificate DeGuire, cheque delivered to Mrs. notes, and a .certificate second and third blank, endorsed and Moore DeGuire all endorsed note: to the fourth 1334shares proceeds it to the bank. delivered With parties deposit to were in blank. The note, pay he instructed the bank due to in es- attached notes with the certificates 1936, and one two December de- which was instructed to crow in bank a ap- on December and to due Upon DeGuire’s de- liver them as follows. ply pay- $1953—towards balance— prinсipal cheque livery of a for the certified note, due December ment any ac- any together with interest note, thereupon The bank to him delivered dáte, a re- interest and crued from last of 1332 attached to the certificate interest, ceipt payment .of all earlier for the 31, 1936,and note December the cer- deliver to him certifi- the bank should attached to of 667 shares that one tificate In was attached. cate to which that note *3 Commis- price for 2001 shares. The and the of certificates the wеnt to shares less, received ten DeGuire had or would free sioner decided that he to have ordinary purchase. as the in 1936 and 1937 abandon in- dividends fact that accordingly. De- income, years and him stead company taxed of this had two be treated they prosperity Guire were to insisted that such extreme that the dividends price purchase enough as of the pay substantially reductions themselves were to suspended purchase price, .he be sold the whole should should balance not, to demin- would be plaintiff arguеs, disguise legal when the effect of them $96,000. transaction; DeGuire ish his “basis” 'below nature of the which was a assessed, judge held paid and the option price the tax as naked to be an uncertain interpretation transaction that his part by prosperity in determinеd judgment ordered right, had been Further, company years. in next three plaintiff. since the dividends declared were when upon price, purchase they credited could before same issue was When ordinary DeGuire, for he income to Circuit on review of the assess Seventh right had no them otherwise. The to use dividends,1 Moore on the same ment Mrs. agreed price and nominal was not the real that Mrs. majority of that court held price; price learn the real one sub- to upon be taxed the divi Moore should not price. tract them from the nominal dends, had had all the DeGuire because ownership of substantial incidents of We agree. cannot The dividends shares since December notwith upon earnings were the shares and were in- that, he defaulted standing the condition if income; exоrably they were someone’s tax- due, they fell payment in the notes as able as income either to DeGuire or to Mrs. dividends, both the shares and reverted Moore. All that the contract effected was Judge dissented, to Mrs. Moore. Evans be suspend to ownership their ultimate for a option had cause on the DeGuire they income; time after had become payable, dividends when the became shares while did indeed impossible that make it optionee and an has no title until he decides were, decide they whose income that was its property. to take judges All three could change effect. It their char- thought upon that the case turned whether they acter provisionally impound- that were DeGuire became the owner from the outset. security parties ed for the of both until De- pass upon unnecessary find it that We decided up op- Guire whether to take his because, point, us, seems to tions; as it divi they position were in no different properly regarded part dends were cheques, dividend if these had not during DeGuire’s income 1936 and been cashed but attached though even did in he not become sense like the *4 us most gross $137,683.47, the Guire returned least, that seems income of at twenty-five pgr $34.420.87. Incident- contract. which is meaning of the cent of natural helpful to meaning most 1936 dividend on Mrs. also The Moore’s ally it the action, the because, $28,000, appeared, this if was as has plaintiff in the meaning $34,895 that Bosworth’s shares was in contract be construed $6895: irrevocably Hence, entitled 1936 all the 1936 dividends in all. unless Guire was dividend, though he did should been included re- 1936 even have in DeGuire’s the entire part deficiency attrib- up other turn whatever could be as- not no take becomes indistin- in necessary 2001 shares sessed it becomes Hence utable to 1936. part to the condition, attributable guishable attaching to decide whether the this condition- was If he to much of the 1936 dividend as at- 1999 shares. so shares, 2001 part attributable to the right al in tributable of 2001 made it nec- appear not shares, essary postpone it should might it inclusion 1937, income until included in his until item in DeGuire’s income 1937. have unconditionally Even his. became when it courts have times The several result, be- change the so, would not year condi consider in what occasion to a money had, and is an action cause this payment pay tional shall included in show- not recover without could plaintiff ee’s he under has receivеd a income. If withholding defendant was ing that though right, may to ac claim he have This she could money justly hers.2 which is year, in count it to another later he a do, if includ- not Commissioner had year in include it in which re he part 1937 ed DeGuire’s income the in deduction, with ceives it and be content a dividend attributable the 2001 1936 he return it.5 rule if is forced to This later increased the inclusion would have distinguished gov year by more ex- is to be that which his than tax for that through amount would have re- when remains undetermined clusion same erns duced it for 1936. year payment is incomе out the whether the op an example, all. holder at For complete answer to the This would be payment make a which he will except tion we action, circumstance which complete purchase, yet if mentioned, and was forfeit he fails tо have not as which payment then not the and become income this. Commissioner did assess will hand, deficiency against payee. until he for 1936 On the if does 14, complete payment 1942, purchase, will be August was more than five 15, part 1937, realized” after March when DeGuire сome “amount in years 30, 1942, January equation capital gain payee his On had filed return. —then payment In such a case extended time to a seller. does assess year payee statutory as- income in but time to not become June 1197; White, 532, Helvering, 2 Brown v. 301 57 S. Ed. 193, 291 U.S. v. U.S. Stone 356, 725; 851, 54 L.Ed. Blum 81 S.Ct. 78 L.Ed. Ct. 3 Hеlvering, 78, (a) App.D.C. § of the Revenue Act of 64 275 v. 74 Hull v. 482; Int.Rev.Code, 275(a). of Internal § U.S.C.A. 26 260; Cir., 275(c) Revenue 4 87 F.2d Barker Act v. 4 § Int.Rev.Code, Magruder, App.D.C. 122; 275(e). § 68 95 F.2d U.S.C.A. 26 5 Jacobs v. Hoey, Oil North American Consolidated v. F.2d 954. Burnet, U.S. 76 L. S.Ct. n whenit is et al. the dividends BRADBURN received.6 Since McINTOSH case, any by using were income bar No. 3299. nоtes, De- whole dividend to Appeals, Court of Circuit Tenth Circuit. 1936, and as his Guire claimed own Feb. year. in that properly for it taxable event plaintiff argues that also properly dividend was the whole of the income,”
part “gross of DeGuire’s between it the interest difference year. would reduce the omitted income twenty-five percent of that return-
less than ; transparently argument
ed but the is so shall discuss that we it.
untenable
Judgment reversed; complaint dismissed.
CLARK, Judge (concurring). Circuit *5 necessarily disagreeing
Without with
my reasoning, I felt that we brother’s
might dispose simply more of the case becoming
without involved doctrines back, opinion
relating setoff, As etc.
states, payments certainly in parties;
come to one or the
why to that greater has the who ownership?
number of attributes of Here
the analogy ownership “bundle” useful; rights is more, who has the Mrs. purposes,
Moore or DeGuire? And for tax practicalities,
we should look disregard
ing merely rights formal and not useful
piercing general such “op abstractions as rights,
tion.” Comparing beneficial well powers privileges, two,
seems cannot to me we avoid conclusion many
that DeGuire has more as to the stock
than has Moore. This was Mrs. in sub
stance majority the view the the Sev
enth Circuit. Moore v. Commissioner of Revenue, Cir., 991;
Internal 124 F.2d by
fact been reiterated has entire fours, on all
court a case Lee v. Commis Cir.,
sioner of Revenue, Internal 143 F.
2d In of Judge opinion view Minton’s
in the I Moore case need not enumerate the
details rights, of DeGuire’s con myself by saying
tent in summary that purchase,
virtue of his and until and unless away large payment
he chose to throw made, he had substantially controlled stock, corporation itself, but the directors, officers, policies.
its 6 Virginia Revenue, Cir., Iron & Coal Coke Co. v. sioner Internal Commissioner of Internal F.2d 954. 919; Hunter v. Commis notes December which principal to failed case DeGuire рaid. In December when the on accrued interest note and company per declared a dividend of twelve bank was de- due, the principal became cheque on cent and was is- note back him and the certifi- $24,012, liver that sued Mrs. name; Moore. Until remаining attached to it her cate Mrs. 2001 shares this paid payable cheque she endorsed and DeGuire on De- delivered unpaid half This left payable 1936 and of those the bank. cember principal limit; was, on small sum was the if some interest the calamity paid, comрany, were to overtake the so remaining two him the no bank delivered to dividends
Notes
notes
certificates.
It follows that
except
the shares
as he
the owner of
exer
disposition
dividends
to those
whose final
options
years.
in
cised his
those
We shall
in
year
was dеtermined
same
in which
argument
therefore
assume that
declared,
they
period
were
of uncer-
plaintiff’s construction of the contract
is tainty
was irrelevant.
covered all the
right:
Although
it is
this.
which was
dividend of
declared
nearly
purchase price
half the
in
up
those 2001 shares which DeGuire took
promised
balance,
he
had not
year;
in that
for it became ascertainable
expressly agreed
if
it
that
year
defaulted
was
in that
that that dividend
his in-
upon any
properly
the bank should
come and it was
included in
in-
Therefore,
year.
him.
The same
although
true,
return it
is also
come
reason,
in
he would
that event
part
was true that
lose
for the same
of that
purchase price
proportion
which was
of the 1936 dividend
attributable
to the
paid, large
up
which he
1999 shares which
took
in
attached
1936:
Internal