166 Wis. 48 | Wis. | 1917
Lead Opinion
Dividends derived from stock in a corporation are “income” within the meaning of the law. Sec. 1087m — 2, Stats. The present case is ruled by Van Dyke v. Milwaukee, 159 Wis. 460, 150 N. W. 509, therefore little need be said here. In the Van Dyke Case it was held that ordinary dividends derived from stock are conclusively presumed as against stockholders to be earnings or profit, therefore income under the Wisconsin Income Tax Law. Van Dyke v. Milwaukee, supra; Klar Piquett M. Co. v. Platteville, 163 Wis. 215, 157 N. W. 763; Von Baumbach v. Sargent L. Co. 242 U. S. 503, 37 Sup. Ct. 201; State ex rel. Sallie F. Moon Co. v. Wis. Tax Comm., post, p. 287, 163 N. W. 639.
But it is argued that what was distributed in the instant case as dividends was not in fact income even though called dividends. This position is directly contrary to the statute, sub. 2 (b), sec. 1087m — 2. Van Dyke v. Milwaukee, supra;
Tbe contention that the dividends in question were not ordinary dividends declared by a going corporation, hence not income, is without merit, as shown by the cases heretofore cited. There is no claim here that the dividends were declared in cancellation of stock liability or that any stock was in fact canceled, therefore we need not consider or decide such a ease.
It is also contended that the assessments in the instant casé violate the uniformity clause of sec. 1, art. VIII, of the constitution of the state of Wisconsin. No lack of uniformity is presented in the instant ease. All dividends of all stockholders of corporations are reached with the exception mentioned in the Van Dyke Gase. The classification is proper and violates no constitutional provision. Nunnemacher v. State, 129 Wis. 190, 108 N. W. 627; Chicago & N. W. R. Co. v. State, 128 Wis. 553, 108 N. W. 557; Stanton v. Baltic M. Co. 240 U. S. 103, 36 Sup. Ct. 298.
Respondent relies upon State ex rel. Bundy v. Nygaard, 163 Wis. 307, 158 N. W. 87. That ease is distinguishable from the instant case as pointed out in the opinion.
Counsel for respondent also relies upon Von Baumbach v. Sargent L. Co. 207 Fed. 423, and Lynch v. Turrish, 236 Fed. 653. The Von Baumbach Case was overruled in Von Baumbach v. Sargent L. Co. 242 U. S. 503, 37 Sup. Ct. 201. In Lynch v. Turrish, supra, it will be seen that the learned judge who 'wrote the opinion failed to observe the difference between the law upon which that case was decided and the Wisconsin law, as pointed out by Justice Vinje in State ex rel. Sallie F. Moon Co. v. Wis. Tax Comm., post, p. 287, 163 N. W. 639.
We are convinced that the court below was in error and that the judgment below must be reversed.
Dissenting Opinion
(dissenting). I think the decision in State ex rel. Bundy v. Nygaard, 163 Wis. 307, 158 N. W. 87, supports that of the circuit court and requires an affirmance of the judgment. ■
When the Nygaard Case was decided, I understood the intention was to hold that “income,” as used in sec. 1, art. VIII, of the constitution, means gains or profits derived from labor or capital or both, reduced to money or the equivalent; that such meaning was carried into the statute as to income taxes; that such statute, as of the date of its enactment, fixed the status of property then in existence and that it could not thereafter be turned into income, in a constitutional sense. It seems the logic thereof is that all property of a corporation at the date of the Income Tax Law, as regards thereto, is capital assets and cannot be made income to the stockholders by a distribution in the form called dividends, in case of such corporation being a mere holding body, as in this case.
The Prospect Hill Land Company was not a business, concern. It merely held the title to a tract of land to realize thereon and divide the proceeds among its stockholders. It had the property which was distributed, at the time of the passage of the Income Tax Law. It was more valuable then than when distributed. The distribution did not involve any profit to the corporation nor to the stockholders, in a just and proper sense, which accrued after such passage. Why does not the logic of State ex rel. Bundy v. Nygaard then rule the situation ? How can capital assets, fixed as such at the time of passage of the Income Tax Law, and in effect impressed
Many illustrations might he suggested, demonstrating, as it seems, the inconsistency of the decision now with State ex rel. Bundy v. Nygaard and the injustice of it as well. I will rest by giving one showing where such decision will lead.
If a person should adopt the common method of dividing his property between the members of his family without, presently, disorganizing it, of forming a corporation as a holding company and trustee, the shares of stock being made only large enough to admit of the desired division, and very small in proportion to the value of the property, and then distributing it, and the property is subsequently converted into money, without any addition thereto of value, and divided,, the shares would be reckoned as assessable income .in the hands of the distributee, notwithstanding sec. 1087m- — 4, making “inheritances, devises, bequests and gifts received during the year,” not assessable as incomes. The entire property without any gain by the mere transition from the corporation would be converted into assessable income. State ex rel. Bundy v. Nygaard, adhered to, in its unanswerable logic, in my judgment, would render such an unreasonable administration impossible.
I do not care to say more about the decision in Van Dyke v. Milwaukee, 159 Wis. 460, 150 N. W. 509, than that the court there dealt with the ordinary dividends of a corporation made out of profits from business operations which were not readily traceable to the origin as to time. It did not involve, as here, a mere distribution of the property of a holding cor
Dissenting Opinion
(dissenting). I think that what was done in this case was a distribution of property and not of income and that it is squarely within the ruling of this court in State ex rel. Bundy v. Nygaard, 163 Wis. 307, 158 N. W. 87. I do not think that che mere giving of a name to a thing in matters o,f this kind determines its real character either for or against the state. I cannot agree, therefore, with what was said in the case of Van Dyke v. Milwaukee, 159 Wis. 460, 150 N. W. 509, that there is a conclusive presumption as against stockholders that what has been denominated dividends is earnings or profit. Such a presumption may well exist, but it ought not to be a conclusive one, and neither the state nor the individual should be foreclosed from having their respective rights and liabilities determined upon the substance instead of the name of things.