| Wis. | Oct 19, 1920
Lead Opinion
The following opinions were filed July 3, 1920:
Since the oral argument occurred defendant has filed with the clerk a written notice that he waives his appeal from the order denying his motion to quash the writ and asks that the case be considered upon the merits.
Upon certiorari the presumption is that the decision of the board of review is correct, and if upon any reasonable view of the evidence it will support such decision it cannot be disturbed, for the weight or credibility of the evidence cannot be reviewed. State ex rel. Spritka v. Parsons, 153 Wis. 20" court="Wis." date_filed="1913-04-08" href="https://app.midpage.ai/document/state-ex-rel-spritka-v-parsons-8190898?utm_source=webapp" opinion_id="8190898">153 Wis. 20, 139 N. W. 825; State ex rel. Althen v. Klein, 157 Wis. 308" court="Wis." date_filed="1914-05-21" href="https://app.midpage.ai/document/state-ex-rel-althen-v-klein-8191356?utm_source=webapp" opinion_id="8191356">157 Wis. 308 (147 N. W. 373), and cases cited on p. 312.
It is a verity that the corporate assets sold for $1,000,000 cash and $1,250,000 in preferred stock of the General Motors Corporation in July, 1918. The excess of selling price, if any, over their value January 1, 1911, would measure the profit subject to an income tax to the corporation, or to the stockholders thereof if the corporation paid no income tax thereon, which it is conceded it did not in this case. The relator would be .required to pay such proportion of fhe total tax as his shares bear to the total shares of stock. The authorized capital stock of the Janes-ville Machine Company on January 1, 1911, was $500,000. In August, 1915, this was increased to $750,000. By a contract entered into between the stockholders- and the General Motors Corporation in May, 1918, it was agreed that a new corporation known as the “Janesville Machine Company” should be formed, having a capital of $1,000,000 common stock and $1,250,000 preferred stock; that the new company should buy or absorb the old, and that the General Motors Corporation should buy or absorb the new company, paying therefor $1,000,000 in cash and $1,250,000 in its own preferred stock at par. This was done. The old company was dissolved. At any rate the result of the transaction was that the General Motors Corporation received
There is testimony on the part of the relator to the effect that by reason of an undervaluation of the plant of the Janesville Machine Company, of its patents, good will, etc., the true value of the corporate assets was not shown by its book value, and that its true value was as great in 1911 as it was when sold in 1918 and was equal to the price it sold for. Hence there was no profit. Of course the actual and not the book value governs for taxing purposes. Doyle v. Mitchell Bros. Co. 247 U.S. 179" court="SCOTUS" date_filed="1918-05-20" href="https://app.midpage.ai/document/doyle-v-mitchell-brothers-co-99178?utm_source=webapp" opinion_id="99178">247 U. S. 179, 38 Sup. Ct. 467, 62 Lawy. Ed. 1054. On the other hand, there was undisputed evidence that the stock of the Janesville Machine Company had never sold above par; that the relator, who was then president of the Janesville Machine Company, on December 2, 1909, acting as an appraiser in an estate of a stockholder, swore it was worth only eighty per cent. In October, 1911, in another estate, a director and stockholder appraised the value of the stock at par, and testified that there probably was no difference between the value of the stock in October, 1911, and January 1, 1911. Such evidence was competent
In the case of the sale of the property, the fact that other property is taken in part payment does not change the rule as to profits subject to an income tax. If the property taken in exchange is valued at a price that substantially corresponds to its market value, such agreed- price will govern. If it be not valued, then its market value will control. Here there is no evidence to show that General Motors Corporation preferred stock was worth less than par, and for the purpose of income taxation it will, in the absence of other evidence, be deemed worth par. Hence the sale for taxing purposes is equivalent to a cash sale.
At the time of the sale the relator held 1,239 shares of stock. The evidence shows they had cost him par or less. They were valued at par as of January 1, 1911. Since he paid no more than par for any of his stock, the fact that he bought some after Januar)’- 1, 1911, is immaterial, because its increase in value from the time of purchase to the time of sale would be measured by the excess of the sale "price over par. For his share of the corporate assets he received $162;699 in cash and $206,500 in preferred stock, in all $369,199. Subtracting $123,900, the par value of his stock as of January 1, 1911, leaves $245,299. His assessment was
The case presents no question of taxing stock dividends. The corporate assets of the Janesville Machine Company were sold to the General Motors Corporation for a fixed sum. The fact that stock dividends represented shares in the company sold is immaterial. The par value of such shares was deducted and an income tax on only the excess sale price was imposed. Such excess sale price had never paid an income tax, either by the corporation or the relator. As stated' by counsel for the relator on the oral argument, the only question on the merits of the case is, How much more, if any, were the corporate assets of the Janesville Machine Company sold for in 1918 than they were worth on January 1, 1911? The assessor and board of review found they were sold for $242,299 more than their value on January 1, 1911, and for reasons already stated such finding cannot be disturbed on certiorari.
By the Court. — Judgment reversed, and cause remanded with directions to affirm the action of the assessor and board of review.
Concurrence Opinion
(concurring). , I concur in the result in this case for the following reasons: The entire corporate assets of the Janesville Machine Company were sold to the General Motors Company for a fixed sum. From the sale' price was deducted the value of its capital assets. The difference represents the profit derived by the company from the sale. In the manner and by the means described in the statement of facts, the assets of the Janesville Machine Company were distributed to its stockholders, including capital assets and profit in the hands of the company. The corporation paid no income tax upon its profits thus distributed, and they are therefore subject to taxation in the hands of the stockholders, being in effect a distribution of profits, and therefore a dividend and taxable as
The following opinion was filed October 19, 1920:
Per Curiam. A reading of the brief of relator on a motion to change the mandate from an affirmance of the assessment to one requiring a reassessment convinces us that the mandate as entered was probably erroneous because the facts necessary to determine the true tax due on the basis determined by this court were probably not all shown on the hearing. If so, it was not the fault of the' relator, and he should therefore be given an opportunity to show the true facts as he claims they exist. For such purpose neither party is concluded by the evidence already introduced. Both may produce such further evidence as they may be advised.
The mandate is modified to read: Judgment reversed, and cause remanded for a reassessment of the tax upon the basis indicated in the opinion.