U.S. Supreme Court MINNESOTA TEA CO. v. HELVERING, 302 U.S. 609 (1938)

[Page 302 U.S. 609, 612]

When the cash was 'distributed,' petitioner's debts amounted to $106, 471.73, about $6,500 of which was owing to the stockholders themselves. In pursuance of the resolution, the stockholders paid all the debts, retaining sums, aggregating about $6,500, necessary to discharge the amount of petitioner's indebtedness to them.

The question for determination is whether the delivery of the $106, 471.73 by petitioner to the stockholders, an equal sum thereafter being applied by them to the payment of petitioner's debts in pursuance of the resolution, constituted a distribution within the meaning of the provisions of section 112(d)(1) and (2) of the Revenue Act of 1928, 26 U.S. C.A. 112(d)(1, 2) and note, copied in the margin. [Footnote 1]

[Page 302 U.S. 609, 614]

relation of the stockholders to the matter was that of a mere conduit. The controlling principle will be found in Gregory v. Helvering, 293 U.S. 465, 469, 470 S., 55 S.Ct. 266, 267, 97 A.L.R. 1355; and applying that principle here, the judgment of the court below is affirmed.

Mr. Justice CARDOZO took no part in the consideration or decision of this case. Footnotes

Footnote 1 '(d) Same-Gain of corporation. If an exchange would be within the provisions of subsection (b)(4) of this section if it were not for the fact that the property received in exchange consists not only of stock or securities permitted by such paragraph to be received without the recognition of gain, but also of other property or money, then-'(1) If the corporation receiving such other property or money distributes it in pursuance of the plan of reorganization, no gain to the corporation shall be recognized from the exchange, but'(2) If the corporation receiving such other property or money does not distribute it in pursuance of the plan of reorganization, the gain, if any, to the corporation shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other property so received, which is not so distributed.'