1. A transfer by one corporation to another of substantially all
of its assets for cash and common stock of the transferee
corporation
Page 296 U. S. 390
amounts to a reorganization under § 112(i)(1)(A) of the
Revenue Act of 1928 even though the transferor corporation and its
subsidiaries continued in business. P.
296 U. S. 391.
2. The Board of Tax Appeals having omitted to make finding as to
whether the transfer was of substantially all of the assets of the
transferor corporation, the cause is remanded for determination by
the Board of this essential fact. P.
296 U. S. 391.
76 F.2d 454 reversed.
Certiorari to review a judgment affirming a decision of the
Board of Tax Appeals which sustained a determination of a
deficiency in income tax. Compare with the three cases
preceding.
MR. JUSTICE McREYNOLDS delivered the opinion of the Court.
The petitioner contests the validity of a deficiency assessment
for 1929 income taxes. It maintains that the transaction out of
which the alleged gains arose amounted to a reorganization within
the intendment of § 112(i)(1)(A), Revenue Act 1928, 45 Stat.
816.
*
The court below was of opinion that the transaction involved
amounted to a sale of the assets and business of the taxpayer. In
November, 1929, petitioner transferred what the Board of Tax
Appeals seems to have assumed was substantially all of its assets
to the Kraft-Phenix Cheese Corporation, and received therefor
$200,000 in cash and 17,250 shares common stock of the purchaser,
then worth possibly $30 per share. After the transfer,
Page 296 U. S. 391
the taxpayer remained in existence and continued to do business.
It also retained assets of undisclosed value -- namely, shares of
certain subsidiary corporations and some other property. If the
claim of the taxpayer that the transfer included substantially all
its property is correct, then we think what was done amounted to a
reorganization within the statute. The facts in respect of this
were not found by the Board of Tax Appeals, and the cause must be
returned there in order that the omission may be supplied. The mere
fact that the taxpayer and its subsidiaries continued actively in
business would not defeat the claim of reorganization. The
ownership of the stock in the Kraft-Phenix Cheese Corporation gave
the taxpayer a substantial and continuing interest in the affairs
of that corporation.
The judgment of the court below is reversed. The cause will be
remanded to the Circuit Court of Appeals, with direction to that
Court to remand the case to the Board of Tax Appeals for
determination of the value of the retained assets and such further
proceedings as may be necessary.
Reversed.
* Margin of opinion in
Helvering v. Minnesota Tea Co.,
ante, p.
296 U. S. 378.
