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Goodyear Tire & Rubber Co. v. United States
Citations: 273 U.S. 100; 47 S. Ct. 263; 71 L. Ed. 558; 1927 U.S. LEXIS 968; 1 C.B. 332; 6 A.F.T.R. (P-H) 6414; 1 U.S. Tax Cas. (CCH) 206Docket: 90
Court: Supreme Court of the United States; January 3, 1927; Federal Supreme Court; Federal Appellate Court
Prior to April 11, 1921, Goodyear Tire & Rubber Co. had a par value of $100 per share for its outstanding capital stock. Following a reduction of this par value to $1 per share, the company filed a certificate of reduction with the Ohio Secretary of State but did not issue new stock certificates, leaving the old certificates stating a par value of $100. When stockholders transferred their shares to voting trustees as part of a reorganization plan, the Commissioner of Internal Revenue demanded a stamp tax based on the $100 par value on the certificates, rather than the reduced $1 value. Goodyear paid the tax under protest and sued in the Court of Claims to recover the excess, but the court ruled in favor of the government. The primary legal question was whether the tax should be calculated based on the actual par value as per the amended corporate charter or the value printed on the certificates. The applicable revenue statutes from 1918 and 1921 impose a stamp tax of 2 cents per $100 of face value on stock transfers. It was established that the tax applies to the transfer of legal title rather than the certificates themselves, with the Treasury Department affirming that the tax applies even when no new certificates are issued. The government conceded that "face value" in the statute is synonymous with par value, and the determination of par value should refer to the corporate charter rather than the stock certificates, which could misrepresent the actual value. Thus, the amended corporate charter ultimately governs the assessment of the tax. The tax measure in question is based on the actual par value of the stock transferred, and the recovery of any excess tax paid should be permitted. This conclusion aligns with previous case law, including United States v. Isham, which emphasized that the form and terms of a document define its tax applicability. However, in this instance, the tax is applied to the stock transfer itself rather than a specific document, encompassing transfers not necessarily documented in writing. The tax is determined by extrinsic evidence found in the corporate charter. The judgment has been reversed. The tax on stock sales, transfers, or agreements is set at 2 cents for every $100 of face value or fraction thereof, and for shares without par value, the same rate applies to each share.