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U.S. Supreme Court

Bondholders Committee v. Commissioner, 315 U.S. 189 (1942)

Bondholders Committee v. Commissioner of Internal Revenue

No. 128

Argued January 15, 1942

Decided February 2, 1942*

315 U.S. 189


1. Where property formerly owned by an insolvent corporation, subject to a deed of trust securing bonds, but which it has conveyed to another, is acquired through action of its bondholders by a newly formed corporation, partly through foreclosure of the mortgage and partly by purchase for cash from others to whom the legal title has passed by mesne conveyances, there is no "reorganization" within the meaning of § 112(i)(1)(A) and (B) of the Revenue Act of 1932, as between the old and the new corporations -- although, pursuant to the plan, all of the stock of the new corporation is issued to the bondholders of the old -- since the property had ceased to be property of the old corporation. P. 315 U. S. 192.

2. Section 113(a)(7) of the Revenue Act of 1932 authorizes a carry-over of the basis of the properties in the hands of the transferor, not their basis in the hands of one who may have occupied an earlier position in the chain of ownership. P. 315 U. S. 192.

3. The reorganization provisions here in question cover only intercorporate transactions. P. 315 U. S. 193. chanroblesvirtualawlibrary

Page 315 U. S. 190

4. Section 112(b)(5) of the Revenue Act, supra, includes transfers by individuals, but requires that the transferor remain in control, it being inapplicable where the transferor is bought out for cash. P. 315 U. S. 193.

5. The cost of assets bid in by a mortgage creditor on foreclosure is to be determined by the fair market value of the property. P. 315 U. S. 193.

118 F.2d 511 affirmed.

Certiorari, 314 U.S. 590, to review judgments which reversed decisions of the Board of Tax Appeals, 40 B.T.A. 882, overruling deficiency assessments.

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