GLENN, COLLECTOR OF INTERNAL REVENUE,
v.
CHESS & WYMOND, INC.
AI-generated. These summaries, headnotes, and key points are machine-generated and may contain errors or omissions. Always verify against the full opinion text below. Not legal advice.
The court held that a bank's offer of credit, conditioned on opposition to dividend payments absent sufficient earnings, created a legal restriction on dividend distribution under the Revenue Act of 1936.
A bank offered credit to a corporate taxpayer, stating it would oppose dividend payments if quarterly earnings were less than $30,000. The taxpayer ac…
The full statement of facts, procedural history, and disposition for this case are member content.
Join FLexlaw to unlock all legal intelligence© FLexlaw, Inc. — AI-generated enrichments are proprietary. All rights reserved.
PER CURIAM.
On appeal from the order of the district court granting credit on undistributed profits, to appellee corporate taxpayer, predicated upon a contract restricting payment of dividends in accordance with § 26 (c) (1) of the Revenue Act of 1936, 26 U. S.C.A. Int.Rev.Acts, page 836, it appears that the First National Bank, Louisville, Kentucky, offered in writing to extend bank credit to appellee under certain conditions; that, in its offer, the bank stated that, while it understood the corporate taxpayer would pay dividends on certain stock, the bank would, however, definitely oppose payment of such dividends, in case earnings were less than $30,000 per quarter; and that the conditions were fulfilled and the offer accepted by the corporate taxpayer, and credit was received from the bank as a result thereof.
The statement that the bank, in making its offer to be accepted in the future, would definitely oppose the payment of such divi dends, is more emphatic than a statement that the bank was making its offer on the understanding that no such dividends would be paid — although the latter expression more markedly bears the impress of a condition, according to the general acceptance of such a term; and since the milder statement would, unquestionably, be considered a provision of restriction, the more definite and explicit wording of the bank’s attitude is to be likewise interpreted. While the phrasing of the offer could have been clearer, it must be understood and construed as an express provision that the credit was offered on condition that no such dividends would be paid unless the earnings exceeded the given amount.
Under the foregoing facts, the acceptance of the offer resulted in a written contract, executed by the corporate taxpayer, expressly dealing with the payment of dividends; and payment of dividends on the stock in question, without the required earnings, would be in violation of the provision prohibiting them. Sec. 26(c) (1) of the Revenue Act of 1936. Such provision operated “as a legal restriction upon the corporation as to the amounts which it can distribute within the taxable year as dividends.” Sec. (b) of Art. 26-2 of Treasury Regulations 94.
The order of the district court is affirmed.
Cases With Similar Vibessemantic neighbors from the corpus
Citator
Cited By
-
Harding Glass Co. v. Commissioner OF Internal Revenue, 142 F.2d 41 (8th Cir. 1944)
-
Commissioner of Internal Revenue v. John A. Wathen Distillery Co., 147 F.2d 998 (6th Cir. 1945)
-
Rahr Malting Co. v. United States, 145 F.2d 867 (7th Cir. 1944)
Previewing 3 of 5 citing cases — full citator treatment, depth of discussion, and citing context are member features.
Join FLexlaw to unlock all legal intelligence