Golden State Theatre & Realty Corp. v. Commissioner of Internal Revenue

This is an appeal from a decision of the Board of Tax Appeals holding the petitioner liable for income taxes for the year 1936 upon the value of certain of its shares transferred to it by a wholly owned subsidi *642 ary, a corporation known as the San Francisco Wigwam Theatre Company, hereinafter called the “Wigwam Company”.

It appears from the record that in 1931 the Wigwam Company purchased 4,397 shares in the parent corporation for $50,-701.25 and subsequently, on December 15, 1936, distributed them to that corporation. On December 31, 1936, the shares were worth $65,295.45. Whether or not said shares were purchased with earnings of the Wigwam Company does not appear from the record, but it does appear that they were assigned to the petitioner, the parent corporation, on December 15, 1936, without the payment of any consideration therefor. The question is whether the stock so transferred to the parent corporation is a dividend constituting income of that corporation for the year 1936 taxable at its market value under § 115(a), (j), Revenue Act of 1936, c. 690, 49 Stat. 1648 , 26 U.S.C.A. Int.Rev.Code, § 115(a, j).

Whether or not the acquisition of shares of its own stock by a…