CRANE-JOHNSON COMPANY
v.
HELVERING, COMMISSIONER OF INTERNAL REVENUE
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A corporation challenged the federal government's imposition of a surtax on its undistributed profits under the 1936 Revenue Act, arguing that state law prohibited it from distributing those profits due to a pre-existing deficit. The Supreme Court affirmed the lower courts' decisions upholding the surtax, holding that state law restrictions on dividend distributions do not exempt corporate profits from federal taxation under the undistributed profits surtax.
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Mr. Justice Black delivered the opinion of the Court.
Because of a previously existing deficit, petitioner corporation was prohibited by state law1 from distributing as dividends its profits earned in 1936. Notwithstanding this state prohibition, the Commissioner held respondent liable under the 1936 Revenue Act2 for surtax on undistributed profits. The Board of Tax Appeals sustained the Commissioner,3 and the Circuit Court of Appeals affirmed.4 On a similar state of facts the Court of Appeals for the Ninth Circuit held undistributed profits exempt from surtax.5 We granted certiorari in both cases to resolve this conflict.6 The legal questions here presented are in all respects the same as those presented in Helvering v. Northwest Steel Rolling Mills, ante, p. 46, and on the authority of that case the decision below is
Affirmed.
“The directors of corporations must not make dividends except from the surplus profits arising from the business thereof ...” N. D. Comp. Laws (Supp. 1925) § 4543.
49 Stat. 1648, 1655.
38 B. T. A. 1355.
Northwest Steel Rolling Mills v. Commissioner, 110 F. 2d 286.
309 U. S. 692; post, p. 629.
Cases With Similar Vibessemantic neighbors from the corpus
Citator
Cited By (12 total)
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United States v. Ogilvie Hardware Co., Inc., 330 U.S. 709 (U.S. 1947)…and the state prohibition against payment of dividends. The Commissioner’s interpretation and application of the 1936 Act was in accord with our holding in Helvering v. Northwest Steel Rolling Mills, 311 U. S. 46, and Crane-Johnson Co. v. Helvering, 311 U. S. 54. The taxpayers in those cases claimed exemption from the surtax on the ground that they could not distribute dividends “without violating a provision of a written contract executed by the corporation prior to May 1, 1936, which provision expressly d…
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Warren Tel. Co. v. Commissioner of Internal Revenue, 128 F.2d 503 (6th Cir. 1942)…2, and restricted the payment of further dividends until they were available out of net operating income. In Helvering v. Northwest Steel Rolling Mills, 311 U.S. 46, 61 S.Ct. 109, 85 L.Ed. 29, and its companion case, Crane-Johnson Co. v. Helvering, 311 U.S. 54, 61 S.Ct. 114, 85 L.Ed. 35, the Supreme Court reached the conclusion that under the plain words of § 26(c) (1), the Congress did not grant a special exemption to corporations in situations where dividend payments were prohibited by state law. It als…
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Commissioner of Internal Revenue v. Erie Forge Co., 167 F.2d 71 (3d Cir. 1948)…1939, 102 F. 2d 919; Bankers’ Pocahontas Coal Co. v. Burnet, 287 U.S. 308, 53 S.Ct. 150, 77 L.Ed. 325; Chiquita Mining Co. v. Commissioner, 9 Cir., 1945, 148 F. 2d 306; Crane-Johnson Co. v. Commissioner, 8 Cir., 1939, 105 F. 2d 740, 744, affirmed in 311 U.S. 54, 61 S.Ct. 114, 85 L.Ed. 35; Second Carey Trust v. Commissioner, 1942, 75 U.S.App.D.C. 263, 126 F. 2d 526, certiorari denied 317 U.S. 642,'63 S.Ct. 34, 87 L.Ed. 517; [*75] Jankowsky v. Commissioner, 10 Cir., 1932, 56 F. 2d 1006; Standard Knitting Mil…
Previewing 3 of 12 citing cases — full citator treatment, depth of discussion, and citing context are member features.
Join FLexlaw to unlock all legal intelligenceAuthorities Cited
- Crane-Johnson Co. v. Commissioner of Internal Revenue, 105 F.2d 740 (8th Cir. 1939)
- Nw. Steel Rolling Mills, Inc. v. Commissioner of Internal Revenue, 110 F.2d 286 (9th Cir. 1940)
- McGoldrick v. Gulp Oil Corp., 309 U.S. 692 (U.S. 1940)