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252 F.2d 805

Docket No. 186.

Docket Docket 24839.

Weil v. Commissioner

Second Circuit Court of Appeals

Argued February 10, 1958.

Decided March 6, 1958.

Second Circuit Court of Appeals

2 counsel of record

Key passage — most relied on by later courts

“(T)he corporation may be treated as collapsible if `manufacture, construction, or production' was a principal corporate activity even if the `view to' collapse was not the principal corporate objective when the corporation was `formed or availed of * * *'.”

quoted by 2 later decisions, including Max Mintz and Hilda Mintz v. Commissioner of Internal Revenue, Louis Mintz and Maybelle Mintz v. Commissioner of Internal Revenue, Morris Mintz and Evelyn Mintz v. Commissioner of Internal Revenue, Mintz v. Commissioner

“(m) Collapsible Corporations.— (1) Treatment op gain to shareholders. — 'Gain from the sale or exchange (whether In liquidation or otherwise) of stock of a collapsible corporation, to the extent that it would be considered (but for the provisions of this subsection) as gain from the sale or exchange of a capital asset held for more than 6 months, shall, except as provided in paragraph (3), be considered as gain from the sale or exchange of property which Is not a capital asset. (2) Definitions.— (A)For the purposes of this subsection, the term “collapsible corporation” means a corporation formed or availed of principally for the manufacture, construction, or production of property, for the purchase of property -which (in the hands of the corporation) is property described in subsection (a)(1)(A), or for the holding of stock in a corporation so formed or availed of, with a view to— (i) the sale or exchange of stock by its shareholders (whether in liquidation or otherwise), or a distribution to its shareholders, prior to the realization by the corporation manufacturing, constructing, producing, or purchasing the property of a substantial part of the net income to be derived from such property, and (ii) the realization by such shareholders of gain attributable to such property. ******* (3) Limitations on application of subsection. — In the case of gain realized by a shareholder upon his stock in a collapsible corporation.— (A) this subsection shall not apply unless, at any time ”

quoted by 1 later decision, including Lowery v. Commissioner

Relies on Weil v. Commissioner

Good law ✅— No negative treatment on recordhow we know

Opinion by Per Curiam ·

How this case has been cited

Cited by 34 later decisions — most recently March 1981 · most notably Arthur Glickman Herman Glickman and Ruth Glickman and Aaron Glickmand and Freda Glickman v. Commissioner of Internal Revenue (1958), Bornstein v. United States (1965)

15 federal appellate ·

2001958196019701980decided

Later decisions citing this case, by decade. The current decade is in progress, and our corpus holds fewer opinions from the most recent years, so the latest bars are undercounted — not a real decline.

View the full empirical analysis of this case →

Martin J. Walzer, New York City (William Walzer, New York City, on the brief), for petitioners.

Thomas N. Chambers, Atty., Dept. of Justice, Washington, D. C. (Charles K. Rice, Asst. Atty. Gen., Lee A. Jackson and Harry Baum, Attys., Dept. of Justice, Washington, D. C., on the brief), for respondent.

Before HINCKS, LUMBARD and WATERMAN, Circuit Judges.

PER CURIAM.

¶1

This case presents questions concerning the "collapsible corporation" section of the Internal Revenue Code of 1939 as amended, 26 U.S.C.A. § 117(m). Its somewhat similar counterpart is found in the 1954 Code at 26 U.S.C.A. § 341.

¶2

In an opinion by Judge Opper, reported at 28 T.C. 809 and reviewed by the Tax Court, it was unanimously held that the corporation in question, Edsol Realty, Inc., was properly treated as collapsible within the ambit of the section cited. With that opinion we are in full agreement.

¶3

However, now on review among their contentions the petitioners raise one, not dealt with in the Tax Court opinion, which relates to the meaning of the word "principally" as used in § 117(m) (2).

¶4

"(A) For the purposes of this subsection, the term `collapsible corporation' means a corporation formed or availed of principally for the manufacture, construction, or production of property, … or for the holding of stock in a corporation so formed or availed of, with a view to —

¶5

"(i) the sale or exchange of stock …."

¶6

Petitioners argue that "principally" should be read as modifying "with a view to" so that to be held collapsible a corporation must be "formed or availed of" "principally" with a "view to" collapse. With this artificial and restricted interpretation we do not agree. We read the word "principally" as modifying the phrase "manufacture, construction, or production of property …." Under this reading, the corporation may be treated as collapsible if "manufacture, construction, or production" was a principal corporate activity even if the "view to" collapse was not the principal corporate objective when the corporation was "formed or availed of …." This interpretation, we think, is more consonant with Congress' expressed purpose to "plug" a loophole in the tax structure with this section. See H.Rep. No. 2319, 81st Cong., 2d Sess., p. 99. See also MacLean, Collapsible Corporations — The Statute and Regulations, 67 Harv.L. Rev. 55, 59-60.

¶7

Affirmed.

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