CHANROBLES VIRTUAL LAW LIBRARY
US LAWS, STATUTES and CODES : Chan Robles Virtual Law Library USA Supreme Court Decisions | Resolutions : Chan Robles Virtual Law Library

ChanRobles™ Virtual Law Library™ | chanrobles.com™   
Main Index Repository of Laws, Statutes and Codes Latest Philippine Supreme Court Decisions Chan Robles Virtual Law Library Latest Legal Updates Philippine Legal Resources Significant Philippine Legal Resources Worldwide Legal Resources Philippine Supreme Court Decisions United States Legal Resources United States Supreme Court Jurisprudence ChanRobles LawTube - Social Network

ChanRobles Internet Bar Review : www.chanroblesbar.com DebtKollect Company, Inc. - Debt Collection Firm Intellectual Property Division - Chan Robles Law Firm

Philippine Supreme Court DecisionsChanRobles On-Line Bar Review

google search for chanrobles.comSearch for www.chanrobles.com


COMMISSIONER V. PHIPPS, 336 U. S. 410 (1949)

Subscribe to Cases that cite 336 U. S. 410 RSS feed for this section

U.S. Supreme Court

Commissioner v. Phipps, 336 U.S. 410 (1949)

Commissioner v. Phipps

No. 83

Argued December 10, 1948

Decided March 14, 1949

336 U.S. 410

Syllabus

In 1936, a parent corporation made a tax free liquidation of five of its wholly owned subsidiaries by distributing to itself all of their assets, subject to their liabilities, and redeeming and cancelling all of their stock. At that time, one subsidiary had earnings and profits of $90,362 accumulated since February 28, 1913, and the other four had deficits aggregating $3,147,803. Not counting the earnings or deficits of its subsidiaries, the parent had at the end of that year earnings and profits of $2,129,957 accumulated after February 28, 1913. In 1937, it had earnings of $390,387. During 1937, the parent made a pro rata cash distribution of $802,284 to its preferred stockholders.

Held: this distribution in its entirety was a dividend under § 115 of the Revenue Act of 1936, and constituted ordinary income. Pp. 336 U. S. 411-421.

1. The rule of Commissioner v. Sansome, 60 F.2d 931, is grounded not on a theory of continuity of the corporate enterprise, but on the necessity to prevent escape of earnings and profits from taxation. Pp. 336 U. S. 414-417.

2. Harter v. Helvering, 79 F.2d 12, distinguished. Pp. 336 U. S. 417-418.

3. Under the Sansome rule, explicitly ratified by Congress, tax-free reorganizations do not disturb the status of earnings and profits otherwise available for distribution. Pp. 336 U. S. 418-421.

4. In this case, to allow deduction of the subsidiaries' deficits from the parent's earnings would, in effect, recognize losses the tax effects of which Congress has explicitly provided should be deferred. P. 336 U. S. 421.

167 F.2d 117, reversed.

The Tax Court held that part of a cash distribution to stockholders by a parent corporation which had absorbed five subsidiaries in a tax free liquidation was not a dividend taxable as income under § 115 of the Revenue Act of 1936, because the accumulated earnings and profits of the parent corporation, plus those of one of the subsidiaries, chanroblesvirtualawlibrary

Page 336 U. S. 411

were erased by the aggregate deficits of the other four subsidiaries. 8 T.C.190. The Court of Appeals affirmed. 167 F.2d 117. This Court granted certiorari. 335 U.S. 807. Reversed, p. 336 U. S. 421.





Back
ChanRobles™ LawTube

google search for chanrobles.com Search for www.chanrobles.com


Supreme Court Decisions Philippine Supreme Court DecisionsUS Supreme Court Decisions



www.chanrobles.us




QUICK SEARCH

cralaw

Browse By ->> Volume


cralaw

Browse By ->> Year


cralaw

  Copyright © ChanRobles Publishing Company | Disclaimer | E-mail Restrictions
ChanRobles™ Virtual Law Library | chanrobles.com™
 
RED