Finanzwissenschaft

Bibliographic data

Monograph

Identifikator:: 1746729937

URN:: urn:nbn:de:zbw-retromon-119900

Document type:: Monograph

Author:: Földes, Béla http://d-nb.info/gnd/119338211

Title:: Finanzwissenschaft

Edition:: 2., neubearbeitete Auflage

Place of publication:: Jena

Publisher:: G. Fischer

Year of publication:: 1927

Scope:: XIV, 683 S.

Digitisation:: 2021

Collection:: Economics Books

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Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Erstes Buch. Einleitende Lehren

Collection:: Economics Books

STOCK DIVIDENDS 21 the term ‘dividend ” in its ordinary acceptation does not include stock dividends, and that since the act of 1913 used the term “dividend” without qualification stock dividends were not taxable under it. Gibbons ». Mahon (136 U. S. 549, 559, 560). (3) The act of 1916, however, expressly taxes stock dividends, and hence Towne v. Eisner is not controlling. The case of Lynch v. Hornby (247 U. S. 339), holding that cash dividends are to be treated as income for the year in which received, whether paid out of earn- ings accruing before or after March 1, 1913, in view of the reasons stated for the holding, would not have been inconsistent with a holding that stock dividends were taxable when representing earnings accruing after March 1, 1913, but not taxable when representing earnings accruing before that date. But whether such holdings would have been inconsistent or not, the holding in Lynch ». Hornby is not controlling in this case, since the act of 1916 makes it plain that dividends, whether paid in cash or stock, are to be taxed only when they represent earnings accruing after March 1, 1913. While Gibbons ». Mahon, supra, holds that as between a life tenant and a remainderman stock dividends are not income, that case arose in the District of Columbia, involves no Federal question, and is not controlling in similar cases arising in the State courts. As a matter of fact, most of the State courts have adopted a different ruling and hold that stock dividends are income. In the act of 1916, therefore, Congress was clearly within its power when it declared that by ‘dividends’ it meant either cash or stock dividends in accordance with the meaning of the term as understood and construed by the courts of most of the States. (Pritchitt ». Nashville Trust Co., 96 Tenn. 472; Thomas v. Gregg, 78 Md. 545; McLouth ». Hunt, 154 N.Y. 179; Will of Pabst, 146 Wis. 330; Lord ». Brooks, 52 N. H. 72; Hite ». Hite, 93 Ky. 257; Moss’s Appeal, 83 Pa. St. 264; Paris v. Paris, 10 Ves. Jr. 184; Tax Commissioner ». Putnam, 227 Mass. 522; Matter of Osborne, 209 N. Y. 450; Goodwin ». McGaughey, 108 Minn. 248.) The ultimate object of corporate business is gain to the stockholders. This gain always and necessarily first appears in the shape of undivided profits which are held in trust for them. When, later, dividends are declared, the cash or stock received by a stockholder is the same gain converted into a concrete form for the convenient payment, transfer, or definite assignment to him of his share of the previously undivided profits. The Government is under no delusions as to the nature of a stock dividend, or as to what it accomplishes. It serves to readjust the evidence of ownership by which the stockholder previously held his share of both capital and undivided profits. His share of profits is invested for him in the stock of the company. The profits are segregated from his former capital and he has a separate cer- tificate representing his invested profits or gains. It is, of course, conceded that this transaction does not, of itself, make the stockholder richer than he was before. The Government readily agrees that there has been a mere change in form of that which already belonged to the stockholder and that what was not income before is not income after a stock dividend. But this contention of defendant in error proves too much and destroys her ease. Her share of undi- vided profits which has, by undergoing a mere change of form, become 198 shares of stock, was itself income within the power of Congress to tax. Unless its change of form destroyed its previous character it was still income. It is defendant in error and not the Government, who must rely upon the change of form for success in this case. The Government claims the right to tax gains when wearing a new dress only when they were taxable in their old dress. The defendant in error’s contention can not succeed unless the new dress destroys the power to tax which existed before it was put on. ; So far as what they serve to transfer or assign to stockholders is concerned, there are but two points of difference between cash dividends and stock divi- dends. By a cash dividend, a corporation transfers to a stockholder his share of corporate earnings in money, while, in the case of a stock dividend, it first invests the earnings in its business and then issues to each stockholder new shares of stock of the same par value as his share of the earnings or, to use other words, invests each stockholder’s share of the earnings in its own stock at par and delivers to him the stock so purchased. In either case, he simply gets, in a concrete form, the actual gains he has derived from his invested capital. The other point of difference is that a cash dividend may serve either to dis- tribute profits or return capital. A stock dividend, on the other hand, never contemplates a reduction in capital but, on the contrary, necessarily implies an increase in capital to be represented by the new shares. It can never, therefore, cerve to return capital, but that which, in the form of new stock, it assigns to

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