Rockefeller v. United States
United States Supreme Court
257 U.S. 176 (1921)
- Written by Kelli Lanski, JD
Facts
Prairie Oil & Gas Company (Prairie Oil) produced and sold crude petroleum and transported it through company-owned pipelines in Kansas and Oklahoma. Prairie Oil’s transportation business was subject to the supervision of the Interstate Commerce Commission, and the remainder of its business was subject to the authority of the Federal Trade Commission. To avoid a conflict of federal authority, Prairie Oil completed a corporate reorganization and split its pipeline business into a separate company called the Prairie Pipe Line Company (Prairie Pipe). In doing so, Prairie Oil transferred stock for the new company to Prairie Oil’s stockholders. Because Prairie Oil had a corporate surplus in excess of the stated value of its pipelines, transferring stock to Prairie Pipe did not reduce Prairie Oil’s capital. Rockefeller (defendant) owned stock in Prairie Oil and received stock in Prairie Pipe proportionate to his holdings in Prairie Oil. Rockefeller did not claim this Prairie Pipe stock as income on his taxes. The United States (plaintiff) sued Rockefeller, claiming the Prairie Pipe stock represented taxable dividends. The lower court ruled for the United States, and Rockefeller appealed.
Rule of Law
Issue
Holding and Reasoning (Pitney, J.)
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