Crocker v. Malley, 249 U.S. 223 (1919)

Please note: this case begins in mid-page. It therefore shares a citation with the last page of the previous case. If you are attempting to follow a link to the last page of 249 U.S. 220, click here.

Crocker v. Malley

No. 649

Argued March 6, 1919
Decided March 17, 1919
249 U.S. 223

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE FIRST CIRCUIT

A law should not be construed to tax the same income twice unless the intent to do so be clearly expressed. P. 233.

The shareholders of a milling company, preliminary to winding it up, caused its active property to be conveyed and its other realty to be leased to a new corporation, the shares of which were left with persons who also were granted the fee of the leased property upon a trust, designated by a name, in which the equitable interests were divided ratably among the original shareholders and evidenced by separable and transferable certificates. The trustees were to hold the trust property upon trust to convert it into money and distribute the proceeds at a time, left to their discretion, within 20 year after death of specified living persons, and in the meantime were to have the powers of an owner, distributing what they determined to be fairly distributable net income among the beneficiaries and applying funds to repairs or development of the property or the acquisition of new, pending conversion and distribution. Their compensation, beyond a stated percentage, was not to be increased, nor were vacancies to be filled or the trust terms modified, without the consent of a majority in interest of the beneficiaries acting separately, who, in other respects, had no control, and were declared to be "trust beneficiaries only, without partnership, associate, or any other relation whatever inter sese." Held that neither the trustees nor the beneficiaries, nor all together, could be regarded as a joint stock association within the meaning of § II, G.(a), of the Income Tax Law of October 3, 1913, and that dividends upon the stock left with the trustees were not subject to the extra tax imposed by that section. P. 232.

Semble that the purpose of the act in taxing corporations and joint stock companies, etc., upon dividends of corporations that themselves pay the tax was to discourage concentration of corporate power through holding companies and share ownership. P. 234.

Where a tax is sustained by the Commissioner of Internal Revenue and its invalidity under the statute is not clear, there is probable cause for its exaction by the collector, and, under Rev.Stats. § 989, in an action against him, recovery will be from the United States. P. 235.

Where a collector, with probable cause, collects an excessive tax, the amount due the United States should be deducted from the recovery in an action against him, and such deduction will conclude the United States. Id.

250 F. 817 reversed.

The case is stated in the opinion.