131 F.2d 429 | 5th Cir. | 1942
In 1934 and in 1935 George Woodruff exchanged Coca-Cola International Corporation stock for' stock in The Coca-Cola Company, and immediately delivered the latter stock in consummation of short sales entered into in previous years. The question for decision is whether the transaction involved an exchange and a sale or whether, by reason of the relative coincidence of time and intent, it should be considered as but one transaction for tax purposes.
The question arose in this way: In 1923 the taxpayer exchanged certain previously acquired stock in The Coca-Cola Company for an equivalent number of shares of Coca-Cola International Corporation stock. In 1929 the directors of Coca-Cola International passed a resolution providing that the corporation would exchange two shares of Coca-Cola stock for each share of Coca-Cola International stock presented by any holder thereof, and that all shares of Coca-Cola International stock so received should be can-celled and retired. The taxpayer, possessing only Coca-Cola International stock in 1934 and 1935 when deliveries were required to be made under short sales of Coca-Cola stock made by him in previous years, proceeded under the terms of the resolution to exchange portions of his Coca-Cola International stock for Coca-Cola stock, which latter stock he immediately delivered to close out his short sale contracts. The Coca-Cola International stock so exchanged was cancelled and retired.
If, as the taxpayer contends, this dual operation should be viewed as one transaction for tax purposes, that is, as a sale of Coca-Cola International stock, the resulting gain would be subject to tax computations under the favorable long-term-capital-gains statute. If the procedure involved two separate transactions, first the acquisition of Coca-Cola stock in a distribution in partial liquidation, and second the sale of a short term capital asset, the tax consequences are conceded to be in the increased amount asserted by the Commissioner in his deficiency assessment.
It is true that the tax consequences of a transaction depend upon the substance of the transaction rather than the mechanics by which it is executed;
Affirmed.
United States v. Phellis, 257 U.S. 156, 42 S.Ct. 63, 66 L.Ed. 180; Weiss v. Stearn, 265 U.S. 242, 44 S.Ct. 490, 68 L.Ed. 1001, 33 A.L.R. 520; Higgins v. Smith, 308 U.S. 473, 60 S.Ct. 355, 84 L.Ed. 406.
Commissioner v. Gilmore, 3 Cir., Aug. 28, 1942, 130 F.2d 791. Of. Commissioner v. Webster, 5 Cir., Nov. 13, 1942, 131 F.2d 426.
26 U.S.O.A. Int.Rev.Acts, pages 703, 704. Cf. Bynum v. Commissioner, 5 Cir., 113 F.2d 1.
Of. Yalley Waste Mills v. Page, 5 Cir., 115 F.2d 466.