The opinion
Leech,
dissenting: The necessary premise of the majority opinion is that petitioner paid dividends to its stockholders in the amount of the corporate note. The argument to sustain that position is that the note was similar to “scrip”, that a corporate debt was thus created and the contested interest paid thereon was therefore deductible.
The fallacy in that argument seems to me to be that such note was not similar to “scrip.” It was drawn to trustees. The petitioner, not the stockholders, was the real beneficiary of the trust. The only interest the stockholders received in the proceeds of the note was the right to a proportionate distribution of any such proceeds which were “not in the judgment of said trustees needed by the said T. R. Miller Mill Co., Inc.” (Emphasis supplied.) And such rights as the stockholders had in the notes could be wiped out at any time at the discretion of the trustees since they had the “right, power and authority to mortgage, transfer, assign and hypothecate, for the use and benefit of T. R. Miller Mill Co., Inc., the said distribution of Five Hundred Thousand Dollars ($500,000.00), or any part thereof; or to transfer, assign or hypothecate the note or notes securing or evidencing such distribution * * *.”
Even had this so-called distribution of $500,000 been made in cash to such a trust, could it be reasonably held that the petitioner thus actually paid or the stockholders really received anything?
In such circumstances, I think no dividend was paid, no corporate debt existed, and no interest thereon is therefore deductible.