*1 1187 fact, one regarded be then general denial. If that issue that, non-existence of if the existence or principle applicable inferior which the tribunal jurisdiction depends upon contested facts lie. ex determine, prohibition will not rel. competent to [State 966; ex Porterfield, 244 S. W. State rel. App. v. 211 Mo. Emory If, Duncan, App. 193 W. Finch v. 950.] question a hand, regarded-either as one of law or mixed the issue be fact, the same follows because the circuit court of law result to determine the effect jurisdiction in the first instance may plaintiffs. pleaded by of the That orders Federal Court construing applying reach them the an erroneous conclusion ground by prohibition. facts is not sufficient for interference ground challenge opinion are second jurisdiction supra, admittedly statute, is likewise untenable. The applicable corporations. to railroad well If as other we entertained statute, amenability original doubt of the trustees’ an proposition, dispelled by it would be force of the order of the Federal part case, Court which was introduced relators as reported by the provides, alia, referee. inter the trustees “manage operate according said railroads requirements to the of the valid laws states various situated, Bailway said railroads are in the same manner that the Com pany possession thereof(Italics would he hound to ours.) if alleged grows That management omission out of the trustees’ operation of said open question. also, railroad is not Ward v. [See, al., Kurn et 234 Mo. App. 241, (2d) 245; McCrory v. (Mo. al. App.), Kurn et 101 S. W. 114.] For indicated, the reasons provisional prohibition our rule in should discharged. It is so ordered. All concur. Josephine G. Wood v. Phil Successor Assessor to Martin Deuser, Neap L. St. County, Louis Forrest Smith, Auditor, Appellants. S. W. (2d) 303. September Two,

Division 1942. *2 Stone, McKittrich, Attorney General, and Bussell G. Assistant Boy General, Attorney appellants.

Henry Lowenhaupt, Lowenhaupt G. Abraham and William H. Lowenhaupt, Ghasnoff, for respondent; Charles Waite <&Stolar and Gunnmgham Willson & of counsel.

BOHLING, C. Phil D'euser, County, Assessor of St. Louis *3 Smith, Auditor, perfect judg- this appeal Forrest from a abating ment an assessment tax the $315.54 additional income for of year against Josephine in Wood, plaintiff G. nisi. The- issue May plaintiff legally year substance is: claim tax credit the a for on corporation paid dividends of a Missouri (which Missouri its. earnings paid foreign involved) tax on corporation the to a holding whose only activity was the of the stock of Missouri- cor- the poration, payable and which a dividends in turn are trust estate holding legal foreign the corporation title to stock said for. the use plaintiff, and benefit of ? a Missouri resident The P.A. Green Fire Company corporation Brick is a Missouri (hereinafter designated the corporation). Jopergreen Missouri The Corporation (hereinafter designated a Corporation) foreign corporation, organized Delaware, under the of the state of laws holding the stock corporation, of said Missouri Plaintiff was one several, beneficiaries like by in trust created P. Green indentures A. Josephine Green, B. wife, in- husband said estates trust cluding among their assets corpora- shares stock of said Delaware tion. The corporation Missouri a tax paid Missouri income on 54.58 per year centum of its year preceding net income the the for questioned plaintiff. return, return of tax Plaintiff’s 1935 income in so far material, “$29,328.85,” gross showed a “total income” of including the “(3) etc., item: of corporations Dividends on stock $28,905.72.” A “net $26,273.29” income” of after al- was shown lowable deductions “Computation from income. Under a of Tax” “net tax after special credit” of “$915.93” shown. Then was followed the dispute: item in “Less: credit Tax (2%) — $28,905.72 $600.39, $315.54;” in resulting tax of a.net 54.58% The $28,905.72 item represents plaintiff’s interest under said paid corporation the Missouri by in dividends

trust in Sec. has its foundation Plaintiff’s claim corporation. Delaware which, provides: part, R. S. in the the tax on income included purpose “For this article or any corporation, received return of stockholder of during period, taxable amount credited with the earned by multiplying rate state tax on cor- obtained Missouri dividends, or net porate by portion or of such amount corporation earnings any corporation upon such paid preceding to the state of for last tax Missouri its period taxable .” plaintiff

Under entitled said Section would have been $28,905.72 to the credit here as a claimed she received had of the corporation. plaintiff’s stockholder Missouri However interest $28,905.72 her interest in beneficiary is under and virtue of argue the aforesaid plaintiff trust indentures. Defendants not entitled to the claimed a First, credit because: plaintiff corporation; e., stockholder of- a i. corporation or the corporation. Second, Delaware corporation that the whose dividends are involved, the corporation, paid no income tax on its earnings net to the State of preceding Missouri for last taxable its period. It was practice established of record that a number of years charged of those with the administration of the had been law to allow known beneficiaries of ascertained interests in trust estates to credit, under returns, Section 11350 income tax paid by corporation upon its in those wherein instances corporate its payable dividends were estate trust reason holding its title to stock in the for the use beneficiary. benefit interpretation This law not contradicted of record, is not disputed accords, here, and we think, with *4 Section R. 1939; which, S. material, so far n . provides: “Income persons received estates of deceased . . and also such income of or any estates kind held in trust . . . shall be taxed, likewise the tax instance, in each except when the income is returned for purpose of tax by beneficiary, to be assessed to the . . . trustee . Provided, . .: that where income is to be distributed annually or regularly existing between . . . beneficiaries, the rate of tax computing and method of same shall be upon based in each case the amount of the individual ’’ share to be distributed. This contemplates that the interest of known beneficiaries in their ascertained income of may trust estates be reported in the income tax returns of said beneficiaries and taxed as the income of said ignore beneficiaries. The entity result tois of the trust estate and treat its income as the income of its beneficiaries. Plaintiff would have been entitled credit claimed had the trust them held the stock of the Missouri entitling $28,905.72. payment of said the direct functioning is the

What then effect existence and corporation upon parties stipulated the situation? The corporation (the Jopergreen Corporation) “owned and held all-of P. Company” the stock the A. Green Fire Brick (the corporation), and “owned no asset other than said Company, P. Fire Brick only stock of A. Green and its activity ’’ holding such stock. Section is the tax levying provides: R. section. per “There hereby year levied a centum tax on net each . . as follows: .

“Second. ... upon shall be levied . . . and paid by every corporation . . . not organized, existing or authorized under the laws state, of this exempted now or hereafter and not subject to tax under the next section, subdivisions this at the rate per of two cent of net . . . received from all (2%) state, sources this during within year; . . . and preceding provided further, per rate of two cent net (2%) this levied subdivision ... is hereby declared provided rate per cent or of net by, income levied ap- and assessed and as plicable to, third, fourth, subdivisions fifth, sixth and seventh of this section. year “Third. Each ... a tax upon shall be . levied . . paid by every corporation . . . organized, authorized or

existing state, under laws of this every corporation . . . licensed state, business in this . . except . may such as now or hereafter exempted, . . . except corporations whose only activity is the investment re-investment of its own and/or stocks, bonds, funds any securities, estate, other leaseholds, real annuities, any other interest in real estate, stocks, holding and/or bonds, other securities, estate, real leaseholds, annuities or other estate, per interest in real centum, in such now or pro- hereafter vided, of the net income from all during sources in this state preceding year. Income shall include all gains, profits and revenues from the transactions of the business state, of the corporations in this . and all other income from sources in this state as income is otherwise defined.” Section R. S. income, among defines things, provides: “. income shall also include the share of each stockholder in profits undistributed of cor-

porations . whose income not exempted against whose income there provision no for a tax. Interest bonds . and dividends on capital stock, undistributed profits *5 earnings and corporations of . . whose income is not ex- empted against and whose there provision tax, income is no for a " transactions this state and

accruing on account of business state. from sources within this be considered . shall corporation another corporate on stock owned . Dividends receiving dividends where corporation the such be income of not this state declaring paid the tax corporation its to the dividend subject to tax state.” portion of its income this on the corporation tax on its paid extent that the To the income, from reaching corporation derived the Delaware Missouri, the State not to be considered sources within of is corporation say under Section 11345. Defendants Delaware They corporation paid no tax of Missouri. provision exacting no the law a tax the income point to on of corporation income falls within they Delaware nor contend that its 11344, exempted classification under Section R. 11345, supra, from the tax. Under Section includes earnings profits share “in the stockholders undistributed corporations against exempted . whose income is not whose income provision there no for a tax.” In addition Subdiv. Third, 11343, excepts “corporations only activity Section whose investment stocks, re-investment of its own funds in and/or .” holding stocks . of record established and/or controverted investing companies income of such was con- sidered the income of their (the corporation shareholders was not treated a separate entity) for income ad- purposes by those ministering legislative ignore the law. think intent was to the corporate entity corporations functioning as the Delaware cor- poration according functioned to this record and to treat their income as the income rep- stockholders. If the income involved profits resented undistributed is to treated corporation, income, plaintiff’s and not plaintiff would owe no tax only as her on return shows an income $423.13 in $28,905.72 addition reported on blank furnished by the State as “dividends stock of corporations, etc.” Re Union El. (Banc), Co. 970(2-4), states: “It is true that for most purposes corporation corporation law a is con- sidered as a legal person separate and distinct from its shareholders. As such the law it capital considers the owner of its Yet assets. when penetrate we legal beneath the cloak of apparent fiction that in the economic sense the real owners are its assets shareholders. ... In field of income taxation particular it is important penetrate beyond juris- fictions academic prudence to the economic realities of the cases.” The income involved had its source in the State of Missouri. It arose out trans- of business actions here. (See Co., Re Union supra; supra.) El. Section The Missouri corporation paid a Missouri income tax thereon. The provisions of the law plaintiff invoked by recognition are in

1193 has Double already certain income been taxed. taxation is not favored presumed. Louis, is not Gasoline v. to be Co. St. [Automobile 281, 283(3); 435, 443, (2d) Hallenberg-Wagner W. 32 S. State v. 771, 778(3), Co., (2d) 341 Mo. 108 S. W. Motor 402(7).] what been law seemingly think suffieies. The seeks the sub of the economic situation. stance Corporation Jopergreen

With the functioning only as the holder .all Company the stock P. Green Fire Brick engaging A. activity, served, in no purposes we conclude for law, conduit, Missouri income as mere the same as the involved, the passing trust estates the A. P. Brick Company plaintiff; Fire Green that neither it nor the trust are separate apart treated entities from the ultimate purposes; plaintiff, beneficiaries for such and that under made, submission entitled to claimed credit. Cor- [Consult poration Johnson, America (2d) 295, v. Cal. Pac. (2d) 418(1-3).] judgment

The Barrett, affirmed. Westhues and CG., concur. foregoing opinion C., adopted PER CURIAM:—The by Bohling, the opinion judges All the court. concur. Fineberg H. P. Ballard William Maxwell Reals, Charles v. Secretary Education, of the Board of Courson, June School Harry District University City, A. T. Frank, Frank O. D. Wood, Walter L. Fitzwilliam, John J. Metcalf Education, Members Norwine, Constituting Board County, Missouri, School of University City, District St. Louis Appellants. 306. y Two, 28, 1942.

Division Jul Rehearing Denied, September 8, 1942.