C. F. Burgess Laboratories v. Conway

Eschweiler, J. The Tax Commission and court below confirmed the assessment for income tax purposes of the stock issued to the plaintiff at its face or par value of $90,000. This was done largely in reliance upon the ruling in State ex rel. Van Dyke v. Cary, 181 Wis. 564, 191 N. W. 546, where it was held that under our law that a stock dividend is to be taxed as income, a resident stockholder in a Wisconsin corporation receiving such a stock dividend is held bound by such face value because of a statute requiring that the issue of capital stock shall be only for actual value. Whether the same rule, should apply to the issue of stock in a Delaware corporation, such as here presented, in view of the Delaware constitution and statute as construed by its courts and to the effect that it might be lawfully issued for less, as shown in Peters v. U. S. Mortgage Co. 13 Del. Ch. 11, 114 Atl. 598, we deem here immaterial. This assessment must be supported, if at all, because the stock so issued to plaintiff was taxable income under sec. 71.02, Stats., and within either sub. (2) (d), “all profits derived from the transaction of business or from the sale of . . . capital assets,” or sub. (2) (h), “all other gains, profits or income of any kind derived from any source whatever except,” etc. We are satisfied, however, that this stock so issued, taking the place, as it did, of the property interests embodied in the contract between plaintiff and the foreign corporation, was merely a substitution of one form of evidence of ownership for another form of evidence of ownership, and not a gain or profit or an increase in actual value. The situation here is no different in substance from that presented and so recently passed upon in Miller v. Tax Commission, ante, p. 219, 217 N. W. 568, and the conclusion [327] there reached must control here, viz., that there was no taxable income under our statutes supra over and above the $25,000 by reason of the receiving by the plaintiff of the $90,000 of capital stock in exchange for its patents and contract obligations. By the Court. — Judgment reversed.