United States v. Lesoine United States v. Marcus

The question on these appeals is whether the taxpayers, John A. Lesoine and L. J. Marcus, are entitled to refund of income taxes paid by them for the years 1942-1943.

The material facts were stipulated. In 1942 each of the taxpayers owned one-half of the total authorized and outstanding stock of Marcus-Lesoine, Inc., a California corporation.

■ Marcus-Lesoine, Inc. declared ordinary dividends of $40,000 on November 30, 1942, and $80,000 on December 28, 1942. The dividends were payable one-half to each of the taxpayers. The first was paid in cash. The second was credited to the loans re ceivable accounts of the taxpayers on the books of the corporation. In their income tax returns for the year 1942 the taxpayers reported these dividends as income.

On June 14, 1943, liquidation of Marcus-Lesoine, Inc. was commenced. In the course of liquidation proceedings it was determined that there had been an insufficient surplus for payment of the $40,000 dividend of November 30, 1942, and that there had been no surplus for payment of the $80,000 dividend of December 28, 1912.

The corporation recalled the dividends. The cash paid to the taxpayers was returned and the bookkeeping entries…