Floyd W. Bell v. Commissioner of Internal Revenue

PER CURIAM. On this petition for review of decisions of the Tax Court of the United States, the petitioners are stockholders of the Buckeye Stamping Company who were not parties to the contest made by certain other stockholders of that company identically situated. In the former litigation by the other stockholders, this court, in a complete opinion dealing with the subject matter, affirmed the decision of the tax court sustaining the Commissioner. We there held that where taxpayers in the same situation as the parties here borrowed money from the Buckeye corporation to purchase its corporate stock from the original holder, giving their promissory notes in return — the notes being later canceled upon surrender of part of the stock, with the stockholders retaining undiminished fractional interests in the corporation after completion of the transaction — cancellation of the notes was equivalent to distribution of dividends and therefore subject to income tax under the statute [26 U.S.C.A. § 115 (g)] imposing income tax when redemption of corporate stock occurs at such time and in such manner as to make consideration given by the corporation essentially equal to a dividend. Woodworth v. Commissioner of Internal Revenue, 6 Cir., 218 F.2d 719. Upon the authority of and for the reasons stated in our opinion in the Wood-worth, case, supra, the decisions of the tax court in the instant cases are affirmed.