Helvering v. Southwest Consolidated Corporation
United States Supreme Court
315 U.S. 194 (1942)
- Written by Kelly Simon, JD
Facts
Southwest Gas Utilities Corporation (Southwest Gas) was a financially distressed corporation. The assets of Southwest Gas were acquired by Southwest Consolidated Corporation (Southwest Consolidated) (plaintiff) through a transaction in which the assets of Southwest Gas were exchanged for cash, Southwest Consolidated voting stock, and Southwest Consolidated warrants. On its 1934 and 1935 income tax returns, Southwest Consolidated treated the acquisition of Southwest Gas as a tax-free reorganization and reported net losses for both years. The Commissioner of Internal Revenue (the commissioner) (defendant) determined that the transaction was not a tax-free reorganization because the consideration involved included stock, cash, and warrants, and, therefore, Southwest Consolidated owed a tax deficiency arising from the transaction. Southwest Consolidated appealed to the Board of Tax Appeals (the board). The board rejected the commissioner’s reasoning and determined that the transaction must be considered a tax-free reorganization. The commissioner appealed to the United States Court of Appeals for the Fifth Circuit. The circuit court affirmed the judgment of the board. The commissioner then appealed to the United States Supreme Court.
Rule of Law
Issue
Holding and Reasoning (Douglas, J.)
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