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United States v. Snider

224 F.2d 165 (1955)

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United States v. Snider

United States Court of Appeals for the First Circuit
224 F.2d 165 (1955)

Facts

Abraham Snider (plaintiff) owned 25 of 100 outstanding shares of a Massachusetts real estate trust, which owned and operated two hotels in Boston. In 1947, the real estate trust was reorganized through division into two corporations, Hotel Braemore and Hotel Kenmore. The real estate trust then was liquidated. Hotel Kenmore issued a cash dividend of $36,000 total in 1950; Snider received a $9,000 payment. Hotel Kenmore had only $20,000 in earnings and profits in 1950, and approximately $5,100 of the payment received by Snider was attributable to current earnings and profits. Snider reported the payment as a dividend but later sued for refund, claiming that the income was actually a distribution of capital rather than a distribution of earnings and profits. Snider contended that the 1947 losses of the real estate trust should be applied to reduce the accumulated earnings and profits of Hotel Kenmore, which would therefore change the nature of the payment from a dividend to a return of capital. The commissioner of the Internal Revenue Service (United States) (defendant) denied the refund. Snider appealed to the United States District Court for the District of Massachusetts, which ruled in favor of Snider. The United States appealed to the United States Court of Appeals for the First Circuit.

Rule of Law

Issue

Holding and Reasoning (Hartigan, J.)

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