Wells Fargo Bank & Union Trust Co., as of the Estate of Ivey L. Borden, Deceased v. United States

Appellant, as executor of the estate of Ivey L. Borden, deceased, appeals from a judgment denying recovery for overpayment of federal excess profits taxes. The issue before us is whether a transaction in which a certain corporation, of which appellant’s decedent, Mr. Borden, was sole stockholder, acquired the properties of a predecessor corporation of which he was also sole stockholder, constituted a tax-free reorganization. The district court held that it was not a tax-free reorganization within the meaning of Section 112(i) of the Revenue Act of 1932, 26 U.S.C.A.Int.Rev.Acts, page 513.

The background of the controversy is as follows: Mr. Borden, in 1929, was the individual owner of Victoria Island, with an area of 7,300 acres lying in the delta of the San Joaquin River in California. The land was subject to a reclamation district bond issue of $600,000, secured by the island. In 1929, Mr. Borden found it necessary to secure refinancing of the reclamation bond issue and, accordingly, organized I. L. Borden Company, a corporation, to which he transferred Victoria Island in exchange for all its capital stock less qualifying shares; and he induced the reclamation bondholders to…