Golden State Theatre & Realty Corp. v. Johnson

— The plaintiff, Golden State Theatre and Realty Corporation, during the year 1936 owned 50 per cent of the stock of East Bay Theatres, Inc., which in turn owned 100 per cent of the stock of Hayward Theatre, Inc., and 100 per cent of the stock of San Leandro Theatre, Inc. During that year plaintiff received dividends from East Bay Theatres, Inc., representing one-half of the dividends received by the latter from its two subsidiaries. Plaintiff did not include the dividends it received in its return under the Bank and Corporation Franchise Tax Act (Stats. 1929, ch. 13, p. 19, as amended, Deering’s Gen. Laws, 1937, Act 8488) for the income year 1936, but paid under protest an additional tax, with interest, measured by the amount of such dividends. The present appeal is from a judgment denying plaintiff a refund of such tax and interest.

Plaintiff contends that the dividends are deductible from its gross income "as “dividends received during the income year from a . . . corporation doing business in this State declared from income arising out of business done in this State ...” (§ 8(h), Stats. 1935, ch. 281, p. 996.) Plaintiff maintains that the corporation declaring the dividends…