*1 819' many plan to “the claim had become worthless Mokan embarked assets, con- before” if the liquidate 1945. and distribute action, was, companies, sisting operating in chose as it in such of stock exchange pe- for their in it value was incumbent to its shareholders prove fact, for fixed titioner to time first such be the The Mokan shares. exchange early 1945 but the he has done so. the privilege participation later ex- of Affirmed. into 1946. tended Finally, petitioner con- became litigation nothing short vinced delivery compel the 1136 shares would stock, in 1945 that he concluded litigation prohibi- expense of such off,” tive, to write “decided et al. SCHMITT claim,” “dropped forth the set v. ordinary $28,400 loss de- as an item of OF COMMISSIONER INTERNAL year. in his income tax duction REVENUE. taxpayer way The is LEHREN capital loss fix the of a hard who tries to v. by anything a sale. investment COMMISSIONER OF INTERNAL govern principles law which But the REVENUE. long have are clear and such situations 11148, 11149. Nos. iden must be There some

been settled. a loss was event shows that tifiable Appeals Court of United States period. actually in the taxable sustained Circuit. Third peti subjective conclusion of mere Argued Dec. 1953. place will then took that the loss tioner 8, 1954. Decided Jan. v. Commissioner not suffice. Boehm Revenue, Cir., 1945, 146 F.2d Internal 326 U.S. affirmed And the burden L.Ed. 78. upon petitioner proof to show that his is prior to 1945.

claim was not worthless Cir., 1936, Helvering, F.2d Cass 841. of the matter is that

The crux petitioner that he at has not shown recognition as a entitled to time became delivery of Mokan and stockholder dispute. That he under the defaulted only questioned. is Not proof no that the directors au is promise ratified the oral thorized but the receiv Parish July 8, had found no evi ers on option by exercise dence Mokan; four demanding performance find we can no warrant this record On saying petitioner ever was the of Mokan com of the 1136 shares owner mon stock. As *2 Supreme

from this Court Court: “The proportional has in- decided where the terest of the stockholders remains the same and where stock dividends are strictly kind, is no sever- where there capital, ance that incidence of Wiegand come taxation does not occur.” Commissioner, Cir., 1952, 194 F.2d Supreme 481. The cases are

there listed and discussed. Unless facts to recited later Pittsburgh, Pa., Keller, this the distribution de D. Norman clearly McClay, type Pitts- scribed above Smith, fits into the

(Reed, & Shaw brief), transaction first held in Eis nontaxable burgh, Pa., on Macomber, 1920, ner v. U.S. (H. Washington, Marselli, Harry D. C. 64 L.Ed. and ever so held Atty. Gen., El- Holland, Assistant Brian Only persons since. two owned Harry Baum, Sp. Assts. to Slack, lis N. stock of this The rest of respondent. brief), Gen., Atty. on acquired it had been MARIS, and Mc GOODRICH Before and inwas its The two share Judges. LAUGHLIN, Circuit holders certificates for these shares which had been held GOODRICH,Circuit proportion the same as that evidenced taxability of a involve cases certificates held. Joseph changed and Nothing thereby P. Schmitt dividend. was pieces on December S. James and 199 owned, respectively, proportion corpora of one. The called the Wolver- in a tion’s assets owned each of the share Manufacturing Company. just Supply & holders ine the same as it was be richer; for 892 certificate date a fore. Neither On that neither was by the poorer. appears just held of Wolverine in the name The situation to be Washington, pre Bank National the same as the Citizens Pennsylvania. one that has been involving returned The bank sented in all the cases taxa April bility nontaxability on Wolverine certificate to of stock dividends. return there of this a result 1947. As However, the Commissioner asserts company was left this transaction is different. He capital stock. Schmitt 1486 shares of says plan there was a here July, all the rest. owned and Lehren Schmitt and Lehren become the in the treas- thus held corporation, owners of the Wolverine were, pursuant to ury this last stock distribution was the Directors, Board action plan culmination of the and that this Schmitt tributed shareholders culmination was a event. taxable Tax- holdings. proportion to their finding payers claim that the that there of the shares that instead result was supported by was such a is not treasury they being Furthermore, they say, evidence. even if hands of shareholders plan, were such a the conclusion asserted that Commissioner Lehren. The that a taxable event arose out of what- transac- was a taxable distribution ever was done is not a correct conclusion. persuaded Tax Court was tion agree. this statement we With agree, 20 T.C. 352. is a manufacturer of chil- Wolverine games. toys and of facts dren’s Ben- above statement On the substantially jamin appear Bain owned taxable event has F. all that no it would language factory previous also three quote its stock owned To occurred. city, buildings favorable location in a the land to Wol- were leased increasingly widow, El- becomes valuable over a Mrs. Dora now verine. His years, majority the owner is not of his inherited a liott buildings. *3 to taxation the annual Mrs. income and the Wolverine stock way, agreements crease in value. In same if a with the Green made several looking corporation man owns shares in a which to their Lehren and Schmitt gradually through purchase valuable become more shares of Wolverine. her years agreements he is not taxed of the because Each was subse- of these though inability quently increase in value even cancelled of the he is richer because year taxpayers at the end of each than of the to make the he was at year corporation made end of the before. If he called for. poses by increased, of that Mrs. which which has a contract with Green pur- pay upon profit. he must tax were to be course 1486 shares Wolverine taxation; corporation All of this is hornbook chased itself. There law of nobody pay- stipulations denies it. were as to manner of like, important for our ment and the not proposition But if we take the corporation here. The consideration subject increase in value is not a for tax during no cash dividends disposal until is some sale or other enough 1937 to it did 1947. But make event, to make a taxable and then add profit stock was so that Mrs. Green’s proposition to that the that a stock dis- according paid for to the terms change any pro- tribution portional does which agreement. ten-year The result of this interest is not a taxable program pay was to off Mrs. Green then it seems to us that we have this large leave with num- a undoubtedly case. in its It ber of own shares ownership became richer because their also left Messrs. Schmitt Wolverine, which, of shares in several advantageous highly position of years any rate, highly prosper- at was a having company. They ous did not become what owned all of its own piece richer when each another And it left Mrs. was held them. Green evidencing more shares but not with cash of shares. greater proportional interest the com- Whether this was a or not we do pany’s they had assets than before. not see how the distribution of the com- company’s Some stress is laid propor- mon stock held in the purchase, prior to the with tion to what the shareholders Green, Mrs. of the small number of During owned was a taxable event. employees.1 shares held These buying these when Wolverine was agreement whereby employees had an course, subject it, its own shares they repurchase their could corporation. tax as a Mrs. income and in 1947 did do so. We see the facts. to tax on whatever Green significance But we do not see profit these the sale of she regard those facts have with to the stock corporation. But what to the distribution to Schmitt and Lehren. happened imposing to warrant a tax good taxpayers have had the Schmitt and Lehren? If one owns a something they piece and, luek to have own real because of its estate time, the same number of shares after 1. At this several minor there were holdings acquired. stockholders, Green had been some of whom were em ployees. September, 1947, following earnings the distribu- Since Wolverine’s were taxpayers, buy tion of the stock to to be used to out Mrs. permitted employees purchased these purchase to re- price pre- employees their shares at the these stockholders. Two viously paid sell, them reluctant but did so tax payers promised they buy could back (cid:127) judgment will they Tax Court sell When more valuable. become reversed. profit. pay on the they tax will have same are do But until McLAUGHLIN, Circuit object anyone holds an who as situation majority view for I dissent from the go by. gains as the admirably expressed in value reasons so Judge opinion did LeMire dividend The stock T.C. 352. situation.