147 N.Y.S. 611 | N.Y. App. Div. | 1914
The relator is a domestic corporation organized in 1906 with a capital stock of $1,500 divided into sixty shares of $25 each. The purposes for which the corporation was formed, as stated in its certificate of incorporation, were to acquire, buy, invest in, hold, improve, manage, lease, sell, mortgage, pledge and deal in real and personal property in this and other States and countries. Such purpose and the acts of the relator, as stated in relator’s amended capital stock report for the year ending October 31, 1910, were as follows: “ To take title to undivided interests in certain real property situated in the City óf New York, which property was in litigation and subject to a large amount of arrears of taxes and assessments and street opening and other proceedings in which further assessments would be levied; said undivided interests in said property had been inherited from former owners under whose wills the litigation had arisen. For purposes of convenience and the litigation it was thought best to temporarily hold the title to said undivided interests through a corporation. All the Company has done has been to hold the bare legal title to said undivided interests until the property could all be sold. When the property has all been sold the Company will be dissolved. * * * The Company has never improved, sold, mortgaged or dealt with any of the property in which it now or formerly had an interest, nor has the Company received any income or rents therefrom.”
Upon the hearing before the Comptroller the following testimony was given on behalf of the relator relating to the purposes of the formation of the company: “ Q. As a matter of fact, the real purpose of the organization of the company was to have a holding company to hold the interests of these four stockholders ? A. Yes, on account of this litigation. The litigation lasted for some years after 1906, and it was becoming embarrassing for an individual, especially as there were a great many heirs in the litigation as it was. It was hard to serve
Upon the formation of the corporation Mrs. Mary E. Wright, who had inherited undivided two-thirds and one-fifth interests in said real estate, the title to which was in litigation, conveyed said interests to said corporation by quitclaim deed, and as the consideration for such conveyance received the entire capital stock of the company, which under her direction was issued to her four children in equal shares, and they continued to hold the same until the voluntary dissolution of the company in March, 1913. The litigation having terminated favorably as to the interests so conveyed by Mrs. Wright, the trustees, under the wills of former owners in whom were vested the powers of sale of said real estate, in March, 1910, sold the properties, with the exception of one parcel, at public auction, realizing for the former interests of Mrs. Wright, after deducting the expenses of administration, $102,785.02, of which $5,000 was for convenience paid to said stockholders direct, $25,849.02 was paid on account of legal services and disbursements, and the bal- . anee of $71,936 was paid to said company, and by it deposited in bank and immediately distributed to the shareholders of the company. The relator estimated the value of its interest in the unsold parcel of real estate October 31, 1910, at $48,000.
The State Comptroller treated the sum of $76,936 so paid by said trustees to the relator and its stockholders as a dividend of 5,000 per cent paid on the capital stock employed by the relator in the State during the year ending October 31, 1910, and assessed upon said corporation a tax of one-fourth of a mill for each one per cent of said dividend, which tax amounted to the sum of $1,875. The relator duly applied for a revision and resettlement of said assessment, which, after hearing had, the
In view of these facts we think the relator must be held to have been engaged in business within the intendment of section 182 of the Tax Law (Consol. Laws, chap. 60; Laws of 1909, chap. 62). (People ex rel. Waclark Realty Co. v. Williams, 198 N. Y. 54; People ex rel. Vandervoort Realty Co. v. Glynn, 194 id. 387; People ex rel. Fourteenth Street Realty Co. v. Kelsey, 110 App. Div. 797; affd., 184 N. Y. 572; People ex rel. Coney Island Jockey Club v. Sohmer, 155 App. Div. 842; affd., 210 N. Y. 549.)
The second question to be considered is whether the distribution to its stockholders of the proceeds of the sale of its inter
All concurred.
Determination of the Comptroller annulled, with fifty dollars costs and disbursements to relator, and matter remitted to the Comptroller to determine the franchise tax in accordance with the opinion.