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HELVERING v. MINNESOTA TEA CO. *FN*

decided: December 16, 1935.

HELVERING, COMMISSIONER OF INTERNAL REVENUE
v.
MINNESOTA TEA CO.*FN*



CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE EIGHTH CIRCUIT.

Hughes, Van Devanter, McReynolds, Brandeis, Sutherland, Butler, Stone, Roberts, Cardozo

Author: Mcreynolds

[ 296 U.S. Page 379]

 MR. JUSTICE McREYNOLDS delivered the opinion of the Court.

No. 174.

Respondent, a Minnesota corporation with three stockholders, assailed a deficiency assessment for 1928 income tax, and prevailed below. The Commissioner seeks reversal. He claims the transaction out of which the assessment arose was not a reorganization within § 112, par. (i) (1) (A), Revenue Act, 1928, c. 852, 45 Stat. 791: "The term 'reorganization' means (A) a merger or consolidation (including the acquisition by one corporation of at least a majority of the voting stock and at least a majority of the total number of shares of all other classes

[ 296 U.S. Page 380]

     of stock of another corporation, or substantially all the properties of another corporation)." The Circuit Court of Appeals held otherwise and remanded the cause for determination by the Board whether the whole of the cash received by the Minnesota Tea Company was in fact distributed as required by the act. We granted certiorari because of alleged conflicting opinions.

The petition also stated that, as the taxpayer made an earlier conveyance of certain assets, the later one, here in question, of what remained to the Grand Union Company did not result in acquisition by one corporation of substantially all property of another. This point was not raised prior to the petition for certiorari and, in the circumstances, we do not consider it.

Statutory provisions presently helpful are in the margin.*fn*

[ 296 U.S. Page 381]

     July 14, 1928, respondent caused Peterson Investment Company to be organized and transferred to the latter real estate, investments and miscellaneous assets in exchange for the transferee's entire capital stock. The shares thus obtained were immediately distributed among the three stockholders. August 23, 1928 it transferred all remaining assets to Grand Union Company in exchange for voting trust certificates, representing 18,000 shares of the transferee's common stock, and $426,842.52 cash. It retained the certificates; but immediately distributed the money among the stockholders, who agreed to pay $106,471.73 of its outstanding debts. Although of opinion that there had been reorganization, the Commissioner treated as taxable gain the amount of the assumed debts upon the view that this amount of the cash received

[ 296 U.S. Page 382]

     by the company was really appropriated to the ...


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