PLANTERS COTTON OIL CO., INC., ET AL.
v.
HOPKINS, COLLECTOR OF INTERNAL REVENUE
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Three newly organized Texas corporations that acquired substantially all assets of two unincorporated associations owned by the same shareholder sought to claim losses incurred by the associations in a prior year on a consolidated tax return. The Supreme Court affirmed the disallowance of the deduction, holding that the corporations were separate legal entities from the associations and could not use the associations' prior losses, even though the same person owned substantially all shares of both.
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Mr. Justice Cardozo delivered the opinion of the Court.
Three corporations, Planters Cotton Oil Co., Inc., Waxahachie, Planters Cotton Oil Co., Inc., Ennis, and Farmers Gins, Inc., were organized under the laws of Texas in August and September, 1924. Two joint stock associations, Planters Cotton Oil Company, Waxahachie, and Planters Cotton Oil Company, Ennis, which had been organized in earlier years, retained their separate existence. One man, H. N. Chapman, was the owner of 98% of the shares of the unincorporated associations. He caused the assets of those associations, or substantially all of them, to be transferred to the newly organized corporations, and received in return substantially all the shares of stock.
For the fiscal year ending June 30, 1925, the three corporations and the two joint stock associations filed a consolidated income tax return wherein the corporations, which had earned a net income of $147,636.25, claimed a deduction of $78,399.25 for loss suffered by the associations during the year preceding the affiliation. The deduction was disallowed, and suit was brought by the corporation and the associations for the refund of the tax to the extent of the overpayment claimed. The District Court dismissed the petition, 47 F. (2d) 659; the Court of Appeals affirmed, 53 F. (2d) 825; and by certiorari the case is here. .
The controversy is ruled by our judgment in Woolford Realty Co. v. Rose, ante, p. 319, unless the fact that in this case one shareholder, Chapman, was the owner of substantially all the shares of the five affiliated companies supplies an essential element of difference. We think it does not. Chapman was free, if he desired, to continue to do business in an unincorporated form. Preferring the privileges of corporate organization, he brought into being three corporations and did business through them. These corporations are not identical with the unincorporated associations to whose principal assets they have succeeded, and the losses of the associations suffered in an earlier year are not the losses of the corporations that came into existence afterwards.
The judgment is
Affirmed.
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New Colonial Ice Co., Inc. v. Helvering, 292 U.S. 435 (U.S. 1934)…cable statute and show that he comes within its terms. These views, often reflected in decisions of this Court, have been recently reaffirmed and applied in Woolford Realty Co. v. Rose, 286 U.S. 319, 326 et seq.; Planters Cotton Oil Co. v. Hopkins, 286 U.S. 332; and Helvering v. Independent Life Ins. Co., ante, p. 371. When § 204 (b) is read with the general policy of the statutes in mind, as it should be, we think it cannot be regarded as giving any support to the deduction here claimed. It brings into t…
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Omaha Nat. Bank v. Commissioner of Internal Revenue, 183 F.2d 899 (8th Cir. 1950)…rs, Executor, 287 U.S. 404, 53 S.Ct. 205, 77 L.Ed. 389; Burnet v. Commonwealth Improvement Co, 287 U.S. 415, 53 S.Ct. 198, 77 L.Ed. 399; Woolford Realty Co. v. Rose, 286 U.S. 319, 326, 52 S.Ct. 568, 76 L.Ed. 1128; Planters Cotton Oil Co. v. Hopkins, 286 U.S. 332, 52 S.Ct. 509, 76 L.Ed. 1135. And see Hickey v. Chahoon, 2 Cir, 153 F. 2d 107; Sic v. Commissioner, 8 Cir, 177 F. 2d 469, 470. Insofar as the facts are concerned and the reasonable inferences to be drawn therefrom we have jurisdiction to review a d…
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Merchs. Bank BLDG. Co. v. Helvering, 84 F.2d 478 (8th Cir. 1936)…, 76 L.Ed. 1128; Helvering v. Independent Life Ins. Co., 292 U.S. 371, 54 S.Ct. 758, 78 L.Ed. 1311. Generally speaking, a deduction may only be taken by that taxpayer whose' property gives rise to the deduction. Planters’ Cotton Oil Co. v. Hopkins, 286 U.S. 332, 52 S.Ct. 509, 76 L.Ed. 1135; Welch v. Helvering, 290 U.S. 111, 54 S.Ct. 8, 78 L.Ed. 212. We think the exceptions which have specific application to capital gains and losses cannot be transplanted and made applicable to the subject of deductible ex…
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- Planters' Cotton OIL Co., Inc. v. Hopkins, 53 F.2d 825 (5th Cir. 1931)
- Planters' OIL Co., Inc. v. Hopkins (N.D. Tex. 1931)