80 F.2d 429 | 6th Cir. | 1935
Petitioners were stockholders of the Continental Lumber Company. At a stockholders’ meeting held December 12, -1927, the officers of the company were directed to convey all of its assets to Nathan T. Viger as trustee. At the same meeting the articles of incorporation were amended so as to terminate the company’s existence on December 26, 1927. On December 24 the company conveyed all of its real estate to Viger by ordinary form of warranty deed. On the same day it conveyed all of its personal property tó him “to take, hold and collect” and to distribute the proceeds thereof from time to time to the stockholders, their legal representatives or assigns, according to their respective holdings as evidenced by liquidation certificates which he issued to -them. On December 26 Viger executed and delivered declarations of trust of the real estate and personalty, reciting in them that the property was conveyed to him in trust to manage and control, receive the rents, issues, and profits therefrom, to sell and convey, and to discharge the obligations of the lumber company, “and thereupon to divide the residue of said income and proceeds among the registered owners of Continental Liquidation Certificates, according to their respective interests thereby shown and as thereby provided.” Each of the declarations contained a provision that it should not be construed to make the lumber company or its creditors beneficiaries of the trust, or to make the trustee a representative or continuation of the lumber company. The declarations were duly signed and acknowledged by Viger as trustee and subscribed to and approved by the stockholders.
In their tax returns for the year 1927 the petitioners claimed as a loss deductible from income the difference between the value of their stock in the lumber company as of the basic date, the date it was acquired or March 1, 1913, and the value of their trust certificates as measured by the fair market value of like proportional interests in the net assets conveyed to Viger. The Commissioner disallowed the claim and the Board of Tax Appeals sustained his action.
The petitioners contend that the transfer of the assets to Viger was a distribution in kind to the stockholders in liquidation of the company, Viger taking and holding the property as their agent or nominee. The applicable provision of the Revenue Act is section 201 of the act of 1926, 44 Stat. 9, 10 (26 U.S.C.A. § 115 note), which declares: “Amounts distributed in complete liquidation of a corporation shall be treated as in full payment in exchange for the stock, and amounts distributed in partial liquidation of a corporation shall be treated as in part or full payment in exchange for the stock. The gain or loss to the distributee resulting from such exchange shall be determined under section 202 [section 111] , but shall be recognized only to the extent provided. in section 203 [section 112] .”
The question is whether there was a liquidation of the lumber company in the taxable year in question by a distribution of its assets in kind. The respondent contends that there was not under Article 548 of Treasury Regulations 69 quoted in the margin.
The orders of the Board of Tax Appeals are affirmed.
“Art. 548. Gross income of corporation in liquidation. — When a corporation is dissolved, its affairs are usually wound up by a receiver or trustees in dissolution. The corporate existence is continued for the purpose :o£.liquidating the assets and paying,, the debts, and such receiver or trustees stand in the stead of the corporation for such purposes. (See section 282 and articles 1293 and 1294.) Any sales of property by them are to be treated as if made by the corporation for the purpose of ascertaining the gain or loss. No gain op loss is realized by a corporation from the mere distribution of its assets in kind upon dissolution, however they may have appreciated or depreciated in valué since their acquisition. (See further articles 622 and 1545.)”