Pacific Vegetable Oil Corporation v. Commissioner of Internal Revenue

Pacific Vegetable Oil Corporation, hereafter petitioner, in 1949 owned 40.4% of the outstanding stock of a corporation known as Western Vegetable Oil, Inc., hereafter Western.

In October, 1949, petitioner, together with other stockholders offered to sell to Western certain of its (Western’s) capital stock. The offer was accepted. The minutes of the meeting of Western’s Board of Directors in which the offer was accepted merely stated that the ac *683 ceptance of the offer was “deemed to be in the best interests of the company.” This is the sole evidence in the record concerning the purpose of the redemptions.

Petitioner reported as a dividend the sum of $296,120 it received from Western in exchange for 1,346 shares of Western’s stock, and took a dividends received credit of 85%, permitted by § 26(b), I.R.C. of 1939, 26 U.S.C.A. § 26 (b).

The Commissioner of Internal Revenue redetermined the tax by eliminating the dividend income and its offsetting credit, and assessing a long-term capital gain treating the distribution by Western in the purchase of its stock as in partial liquidation. The Tax Court sustained the Commissioner. We have the decision of the Tax Court before us for…

251 F.2d 682 PACIFIC VEGETABLE OIL CORPORATION, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. No. 15273. United States Court of Appeals Ninth Circuit. July 8, 1957. Dudley F. Miller, San Francisco, Cal., William D. Evers, Washington, D. C., for petitioner. Charles K. Rice, Asst. Atty. Gen., Karl Schmeidler, Sheldon I. Fink, Harry Baum, and Ellis N. Slack, Washington, D. C., for respondent. Before ORR, POPE and FEE, Circuit Judges. ORR, Circuit Judge. 1 Pacific Vegetable Oil Corporation, hereafter petitioner, in 1949 owned 40.4% of the outstanding stock of a corporation known as Western Vegetable Oil, Inc., hereafter Western. 2 In October, 1949, petitioner, together with other stockholders offered to sell to Western certain of its (Western's) capital stock. The offer was accepted. The minutes of the meeting of Western's Board of Directors in which the offer was accepted merely stated that the acceptance of the offer was "deemed to be in the best interests of the company." This is the sole evidence in the record concerning the purpose of the redemptions. 3 Petitioner reported as a dividend the sum of $296,120 it received from Western in exchange for 1,346 shares of…

(specially concurring).

The findings of fact of the Tax Court were “clearly erroneous,” as we all agree. From a reading of the record, we are all convinced that a mistake of fact has here been made by that tribunal.

In accordance with the dissent in Earle v. Woodlaw, 9 Cir., 245 F.2d 119, 132 ,. we should hold that, the questions .here are of fact and.not of law. We should not crystalize these factual formulae and thus mold decisions of future situations the facts of which are still unknown. The finders of fact should be permitted to meet new situations and .solve them in the light, of the statute’s and rules of law. Likewise, the mere circumstance that the facts have been stipu.lated does not free this Court from the rule that we have no power to find facts and aré confined to the. adjudication that the facts found by the trial court are acceptable or are in material respects clearly erroneous. ■