218 Wis. 130 | Wis. | 1935
The following opinion was filed March 5, 1935:
In .the years 1922, 1923, and 1924, and for some years prior thereto, the respondents, with the exception that Herman W. Falk did not continue as such a stockholder after December 28, 1922, were stockholders of the Falk Company, a Wisconsin corporation. For each of those years the Falk Company was assessed and paid its taxes upon such of its income as was taxable under ch. 71, Stats. Shortly prior to May 17, 1921, the Falk Company sold and transferred substantially all of its assets to the Falk Corporation and the Falk Investment Company in exchange for the stock of those corporations. On May 17, 1921, the stockholders of the Falk Company adopted a resolution for the dissolution of that corporation, and pursuant thereto, the dissolution thereof and the liquidation and distribution of its assets were effected during the years 1921 to 1924, inclusive. On May 17, 1921, it had an accumulation of considerable surplus because of undistributed profits realized out of income, on most of which it had been assessed for taxation under ch. 71 of the statutes, and on May 20, 1921, it distributed to its stockholders a liquidating dividend, which was payable in liberty bonds. As the amount then distributed to each of the respondents was less than his investment as a stockholder of the Falk Company as of March 1, 1913, it was applied by the assessor of incomes of Milwaukee county
In 1922, 1923, and 1924, sub. (2) of sec. 71.02, Stats, (as amended by ch. 247, Laws of 1917), read (so far as here material) as follows :
“The term ‘income,’ as used in this act, shall include: . . . (b) all dividends derived from stocks ... . provided, that the term ‘dividends’ as used in this section shall be held to mean any distribution made by a corporation . . . out of its earnings or profits accrued since January 1, 1911, and paid to its shareholders whether in cash or in stock of the corporation. . . .”
That language seems so plain and unambiguous that there is no occasion for resorting to such rules of construction as are necessary to determine the legislative intent when terms used in a statute are ambiguous or of doubtful application. As was said in State ex rel. Wisconsin Trust Co. v. Leuch, 156 Wis. 121, 129, 144 N. W. 290, in connection with holding that the rule that strict construction of statutes exempting property from taxation comes into play only after ambiguity appears,—
“. . . The first requisite is honest construction, and that consists in impartially reviewing the writing without any bias for or against the particular meaning and without any preconceived purpose to bring about a particular result. If, viewed in this way and applied to the subject in hand, there is no double or ambiguous aspect of the words employed, there is nothing to do but declare the meaning in the same words employed in the writing or in their ordinary equivalents.”
Undoubtedly, one of the reasons for adding by ch. 247, Laws of 1917, the proviso to sec. 71.02 (2) (b), Stats, (formerly sec. 1087m — 2, (2) (b) ), that the term “dividends” “shall be held to mean any distribution made by a corporation . . . out of its earnings or profits accrued since January 1, 1911,” etc., was to change the decisions in Van Dyke v. Milwaukee, 159 Wis. 460, 146 N. W. 812, 150 N. W. 509,
On the other hand, there was no legislative declaration in this state that liquidating distributions made out of its earnings or profits by a corporation to its stockholders were not to be treated as dividends and included as such by a stockholder reporting his income, until the enactment by sec. 2, ch. 539, Laws of 1927, of par. 3 of sub. (2) (b), of sec. 71.02, Stats. 1927, which provides that—
“Amounts distributed in liquidation of a corporation shall be treated as payment in exchange for the stock, and the gain or loss to the distributee resulting from such exchange shall be determined under the provisions of this paragraph and section 71,02 (2) (d). . . .”
In thus providing that amounts distributed in liquidation of a corporation are to be treated as payments -in exchange for the stock, and that the gain or loss to the distributee resulting from such exchange shall be determined under the
It follows that the liquidating distributions in question were “dividends” which were included within the term “income,” as those terms were defined in sec. 71.02 (2), Stats. 1921 to 1925, inclusive. On the other hand, likewise unambiguous in respect to the terms “dividends or incomes,” is the following provision in sec. 71.04 (4), Stats. 192‘1 to 1925, inclusive, which allowed, as deductions to persons in reporting incomes for the purpose of taxation,—
“dividends or incomes received by any person from stocks or interest in any corporation, . . . the income of which shall have been assessed under the provisions of this act; provided that when only part of the income of any corporation, joint stock company or association shall have- been assessed under this act only a corresponding part of the dividends or income received therefrom shall be deducted; ...”
As the liquidating distributions in question were to be treated as dividends under sec. 71.02 (2) (b), Stats-., and, as such, were to be reported for the purpose of taxation as income, as that term is used in ch. 71, Stats., there is no reason whatsoever, in the utter absence of any provision to the contrary in that chapter, for holding that those distributions were not to be included likewise as within the terms “dividends or incomes” which are used in sec. 71.04 (4), Stats. 1921 to 1923, inclusive, or that, although they were to be reported as such dividends, they were not deductible to the extent that the income of the Falk Company had been assessed for taxation under ch. 71, Stats. Until the enactment of ch. 539, Laws of 1927, the only exception under sec. 71.04
It is also contended on behalf of the Tax Commission that, under the rule recognized in Witter v. Tax Comm. 210 Wis. 207, 246 N. W. 318; Paine v. Oshkosh, 190 Wis. 69, 208 N. W. 790; and State ex rel. Columbia C. Co v. Tax Comm. 166 Wis. 369, 165 N. W. 382, the liquidating1 distributions received by the respondents were not deductible because they were made out of income of the Falk Company, which had not been previously assessed against it under ch. 71, Stats. That contention apparently assumes the facts to be contrary to the statement made by the commission in its decision, dated March 31, 1932, that “the greater part” of the surplus which the Falk Company had on May 17, 1921, “represented an accumulation of earnings upon which Wisconsin income taxes had been paid.” It was out of that surplus that the liquidating distributions in question were made by the Falk Company directly to the respondents as its stockholders. If that statement is correct, then in so far as the liquidating dividends were distributed by the Falk Company
As the additional assessments in question were unauthorized in law, the circuit court’s judgment reversing and canceling the Tax Commission’s order of March 31, 1932, and annulling those assessments, must be affirmed.
By the Court. — Judgments affirmed.
A motion for a rehearing was denied, without costs, on April 30, 1935.