United States v. California Electric Power Co.

This appeal presents the question of, the taxability as an “original issue” -of certain preferred stock issued by appellee-taxpayer as part of an exchange for the. preferred stock outstanding prior to a recapitalization of the corporation. The stamp 'tax was imposed pursuant, to §§ 1800 and 1802 (a) of the Internal Revenue Code, 26 U.S.C.A. §§ 1800 , 1802(a) (prior to the 1947 amendments), and was paid under protest. Appellee duly sued for a refund, and the Government now appeals from an adverse judgment. 1950, 89 F.Supp. 269 .

Appellee is a corporation organized under the laws of Delaware, with its principal place of business in California. Prior to the recapitalization in question here, ap-pellee’s- capital stock consisted of 105,023 preferred shares (par value $100 per share) and 84,683 common shares (par value $10 per share). The stated capital at that time was thus $11,349,130. On June 20, 1941, at a shareholders’ meeting, the certificate of incorporation was amended to provide that each of the outstanding preferred shares should automatically -be converted into four-fifths of a share of new preferred (par value $50 per share) plus six shares of common (par value $10 per…