where the Fifth Circuit limited the application of the phrase “availed of’ to require that the corporation be “availed of .. . with the view to" the collapse of the corporation before a substantial realization of income
How later courts described this case
- where the Fifth Circuit limited the application of the phrase “availed of’ to require that the corporation be “availed of .. . with the view to" the collapse of the corporation before a substantial realization of income
Written by the judges who cited it.
The opinion
HUTCHESON, Chief Judge
(specially concurring).
I concur in the conclusion of the majority that the decision of the Tax Court should be affirmed. I concur too in what is said in the opinion in denying taxpayers’ claims that, because of the limitation in Subsec. (m)(3)(B), they are not subject to the invoked statute. It seems to me, though, that the undisputed facts bring these cases so clearly within both the letter and the spirit of the collapsible statute and the mischief it was enacted to prevent and relieve against and the taxpayers’ three claims of error are so basically lacking in substance that, without straining for reasons, it should be downrightly said so.
I think Judge Parker, in his opinion in Burge v. C.I.R., 4 Cir., 253 F.2d 765 , at page 767 correctly stated the basic considerations obtaining here:
“ * * * The word ‘collapsible’ considered apart from its context would be somewhat misleading; but there can be no question, we think, as to what Congress meant by a ‘collapsible corporation’ as used in the statute. That term was used to describe a corporation which is made use of to give the appearance of a long term investment to what is in reality a mere venture or project in manufacture, production or construction of property, with the view of making the gains from the venture or project taxable, not as ordinary income, as they should be taxed, but as long term capital gains. Because the basic type of transaction which gave rise to the legislation involved the use of temporary corporations which were dissolved and their proceeds distributed after-tax avoidance had been accomplished, the term ‘collapsible corporation’ was employed to describe the corporations used for this form of tax avoidance; but the statute was drawn in broad general terms to reach the abuse which had arisen, whatever form it might take.
*623 “The committee reports describe a collapsible corporation as ‘a device whereby one or more individuals attempt to convert the profits from their participation in a project from income taxable at ordinary rates to long term capital gain taxable only at a rate of 25 per cent.’ ”
In the light of this statement and of the clearly expressed purpose in Section 117(m)(l) to prevent gains from sale or exchange of stock of a “collapsible” corporation from being treated as gains from the sale or exchange of a capital asset, on this record it seems to me that appellants' points of error do not go to the heart of the question, whether the corporations in question were collapsible within the statute, but concern themselves only with quibbling over matters having no real bearing on the determination of the question in the case.