459 F2d 668 Cummins Diesel Sales Corporation v. United States

459 F.2d 668

72-1 USTC P 9378

UNITED STATES of America, Defendant-Appellee.

No. 71-1378.

United States Court of Appeals,
Seventh Circuit.

Argued Nov. 11, 1971.
Decided April 28, 1972.

Walter W. Brudno, Dallas, Tex., William F. Welch, Indianapolis, Ind., Kilgore & Kilgore, Dallas, Tex., McHale, Cook & Welch, Indianapolis, Ind., for plaintiff-appellant.

Johnnie M. Walters, Asst. Atty. Gen., Virginia M. Hopkinson, Atty., Tax Div., U. S. Dept. of Justice, Washington, D. C., Stanley B. Miller, U.S. Atty., Indianapolis, Ind., Meyer Rothwacks, Paul M. Ginsburg, Attys., Tax Div., Dept. of Justice, Washington, D. C., for defendant-appellee.

Before FAIRCHILD and SPRECHER, Circuit Judges, and CAMPBELL, Senior District Judge.1


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This is an appeal from a judgment for the United States in an action for refund of income taxes. Appellant taxpayer held preferred stock with provisions requiring cumulation of unpaid dividends. The stock was redeemed and sums paid to taxpayer were equal to par value plus accumulated, unpaid, accrued dividends, not previously declared. We agree with the district court, following a longstanding administrative interpretation, that since the dividends had not been declared prior to and independently of the corporate decision to redeem, the entire sums should be treated for tax purposes as distributions in exchange for the stock, resulting in a capital gain, and no part should be treated as dividend ordinary income. Nothing need be added to the opinion of the district court.2


The judgment is affirmed.


Senior District Judge William J. Campbell of the Northern District of Illinois is sitting by designation


Cummins Diesel Sales Corp. v. United Sttaes, 323 F.Supp. 1114 (S.D.Ind., 1971)