180 N.E. 885 | NY | 1932
Questions are presented on this appeal arising under article 9-A of the Tax Law (Cons. Laws, ch. 60) which imposes an annual franchise tax upon business corporations measured by "entire net income" (§ 209) which is defined (§ 208, subd. 3) as meaning the "total net income."
Section 210 exempts from the provisions of article 9-A "corporations wholly engaged in the purchase and sale of, and holding title to, real estate for themselves."
Section 211 regulates reports of corporations to the Tax Commission. The annual franchise tax on respondent's net income for the calendar year 1922 is before us.
Subdivision 9 of section 211, as it existed in 1923 (Laws of 1922, ch. 507), provided:
"9. Any corporation owning or controlling, either directly or indirectly, substantially all of the capital stock of another corporation, or of other corporations, liable to report underthis article, may be required to make a consolidated report showing the combined net income, such assets of the corporations as are required for the purposes of this article, and such other information as the Tax Commission may require, but excluding intercorporate stockholdings and intercorporate accounts.
"The Tax Commission may permit or require the filing of a combined report where substantially all the *33 capital stock of two of more corporations liable to taxation under this article is owned by the same interests. The Tax Commission may impose the tax provided by this article as though the combined entire net income and segregated assets were those of one corporation, or may, in such other manner as it shall determine, equitably adjust the tax."
Relator is a New York corporation. Its business is renting motion picture films. It owns the entire capital stock of six domestic and seven foreign corporations. The Commission consolidated with the relator certain of its subsidiary corporations and included in the consolidation the wholly owned Fox Film Realty Corporation. It also included as net income the profits of seven foreign subsidiary corporations which had been taken over by the relator, the sole stockholder, under the guise of a loan account.
The Appellate Division has held (a) that the Fox Film Realty Corporation was wholly engaged in the purchase and sale of, and holding title to, real estate for itself and is not "liable to report" under article 9-A and must be omitted from the consolidated report under section 211, subdivision 9, as above quoted; (b) that the moneys received by the relator from the earnings of its foreign subsidiaries were not taxable as income as it appears that they were loans and not distributions of profits by way of dividends.
The Realty Corporation leased to the relator in connection with the real estate occupied by it for the purpose of renting motion picture films a large amount of personal property, consisting of laboratory and studio equipment, motion picture machines, printing machines and development machinery. The value of this personal property was considerable, both relatively and in the abstract. The Realty Corporation supplied the requirements of the parent corporation not only for the real estate used *34
in its business but also for a fully equipped motion picture plant. Thus it was not confined to the exclusive business of holding real estate. It held personal property as well. It was, therefore, not exempted under the provisions of the Tax Law. (People ex rel. Tiffany Co. v. Campbell,
We hold also that the money received by the relator from its seven foreign subsidiaries was properly included by the Tax Commission as income although the amount was carried on its books as loans made to it by them. The sums were paid by the subsidiaries to their sole stockholder out of earnings or profits. The evidence supported a finding that they were properly considered as "dividends received on stocks." (Tax Law, §
The identity of a sole stockholder with his company need not be considered. The Tax Commission did not *35
have to pass over subsidiaries as mere devices to escape taxation in order to arrive at its conclusions. (People ex rel.Studebaker Corp. v. Gilchrist,
The order of the Appellate Division should be reversed and the determination of the State Tax Commission confirmed, with costs in this court and in the Appellate Division.
CRANE, LEHMAN, O'BRIEN and HUBBS, JJ., concur; KELLOGG, J., not sitting.
Order reversed, etc.