Archer-Daniels-Midland Co. v. United States

DEVITT, District Judge. The above entitled action came on regularly for trial in the United States Courthouse in the City of Minneapolis, on the 6th day of September, 1955 on issues framed by the complaint and answer and upon a stipulation of facts entered into by and between the plaintiff and the defendant, as amended at the trial. The Court having considered all of the evidence submitted, the arguments of counsel and upon all the files, records and proceedings herein, the Court being fully advised in the premises makes the following Findings of Fact I Archer-Daniels-Midland Company, a Delaware corporation, on June 14, 1949, had Common Stock and Surplus accounts as follows: Common Stock — no par value: Authorized 2,500,000 shares Issued and outstanding 1,634,748 shares $9,736,998.96 Surplus: Capital 1,269,706.49 Earned $52,412,543.78 $53,682,250.27 Total Capital Stock and Surplus $63,419,249.23 II On June 14,1949, at a regular meeting of the Board of Directors of Archer-Daniels-Midland Company, the following resolutions were duly adopted: “Whereas this Company has now outstanding 1,634,748 shares of common capital stock, which is represented on the books of the Company at a stated value of $9,736,998.96; and “Whereas it seems desirable and expedient to increase the capital represented by said shares, by transfer to capital account of certain amounts of [800] capital surplus and earned sui-plus, and to decrease the said surplus accounts accordingly ; “Now, Therefore, Be It Resolved by the Board of Directors of Archer-Daniels-Midland Company that the amount of capital represented by the 1.634.748 shares of common stock which are outstanding shall be increased from $9,736,998.96 to $32,694,960.00 by transfer to capital stock account of the entire $1,269,706.49 carried in capital surplus and the amount of $21,688,254.55 from earned surplus account, the said surplus accounts to be decreased accordingly. “Resolved Further that the transfers hereby authorized be entered on the Company’s books and made effective on June 20, 1949.” III On June 20, 1949, Archer-Daniels-Midland Company, pursuant to said resolution, made entries on its books of account decreasing its Capital Surplus account by $1,269,706.49 and decreasing its Earned Surplus account by $21,688,-254.55 and increasing its Capital Stock account $22,957,961.04, making the amount of its Capital Stock account $32,694,960.00, or $20 for each of the 1.634.748 shares of common stock then issued and outstanding. The entries made on the journal of Archer-Daniels-Midland Company were as follows: Capital Surplus $ 1,269,706.49 Earned Surplus 21,688,254.55 Common Stock issued $22,957,061.04 To record transfer of Capital Surplus to Capital Stock account and to transfer $21,688,254.55 from Earned Surplus to Capital Stock account as per resolution of Board of Directors per minutes of meeting held June 14,1949. IV Archer-Daniels-Midland Company did not issue or create any additional shares of its capital stock by reason of said transfer of Capital Surplus and Earned Surplus to Capital Stock account. V Archer-Daniels-Midland Company has tiot at any time issued any shares or certificates of stock in respect to said transfer of Capital Surplus and Earned Surplus to its Capital Stock account. VI No change or modification whatsoever was made in the form of certificate evidencing shares of common stock of Archer-Daniels-Midland Company. VII Archer-Daniels-Midland Company had 1,634,748 shares of common stock outstanding immediately before said transfer of Capital Surplus and Earned Surplus to Capital Stock account and the same number immediately after such transaction took place. VIII On or about August 29, 1951, the Commissioner of Internal Revenue assessed a documentary stamp tax in the amount of $34,436.91 against Archer-Daniels-Midland Company under Section 1802(a) of the Internal Revenue Code of 1939, 26 U.S.C.A. § 1802(a) by reason of said transfer of Capital Surplus and Earned Surplus to Capital Stock account. IX On September 7,1951, Archer-Daniels-Midland Company, after having duly protested such assessment, paid the documentary stamp tax in the amount of $34,436.91 so assessed to the Commissioner of Internal Revenue, District of Minnesota, St. Paul, Minnesota. X On November 29, 1951, plaintiff duly filed a claim for refund of said tax with the Commissioner of Internal Revenue pursuant to the provisions of applicable law and the regulations of the Secretary of the Treasury on the. ground that no tax was payable under Section 1802(a) of the Internal Revenue Code of 1939 by reason of said transfer of Capital Surplus and Earned Surplus to Capital Stock account, by filing said claim with the Collector of Internal Revenue, District of Minnesota, St. Paul, Minnesota. XI On November 11,1952, A. B. Knox, the' Director of Internal Revenue, St. Paul, [801] Minnesota, transmitted to Archer-Daniels-Midland Company by registered mail a notice of disallowance in full of said claim for refund. Conclusions of Law From the foregoing facts the Court concludes: I That the documentary stamp tax in the amount of $34,436.91 assessed against Archer-Daniels-Midland Company under Section 1802(a) of the Internal Revenue Code of 1939 by reason of the transfer of $1,269,706.49 from its Capital Surplus account and $21,-688,254.55 from its Earned Surplus account to its Capital Stock account on July 20, 1949, was erroneously and illegally assessed and collected. II ; That Archer-Daniels-Midland Company is entitled to a judgment against the United States of America for a refund of the amount of $34,436.91 documentary stamp tax paid, plus interest from September 7, 1951. Let judgment be entered accordingly. An exception is allowed.