OVERTON V. COMMISSIONER
162 F.2d 155 (2nd Cir 1947)
NATURE OF THE CASE: This was a tax dispute over the tax status of dividends being paid to
a wife.
FACTS: The corporation created a new class of stock and basically doubled the amount of
outstanding shares in corporation. There were now Class A and Class B stock. The old stock
was exchanged for the new and the stockholders each took the Class A stock and each gave
their wives the Class B stock. The B stock had a liquidating value of $1 per share.
Everything else on liquidation belonged to Class A holders. Class A also had all the voting
rights on all ordinary matters. The wives were precluded from realizing more than one dollar
per share by selling their shares. The A stock was to get noncumulative dividends at the
rate of $10 per share before any payment of dividends on the B stock. If dividends exceeded
$10 per share, then the two classes would share what was left in the ratio of 1/5th for the
A and 4/5ths for the B. Dividends on the B stock totaled $150.40 per share and $77.60 per
share for the A during the six-year period in question. The stock had a book value of $155
per share in 1941. The tax court determined that although the stock was made in gift form it
was essentially an assignment of future dividends.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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