HELVERING V. TEX-PENN OIL CO., 300 U. S. 481 (1937)

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U.S. Supreme Court

Helvering v. Tex-Penn Oil Co., 300 U.S. 481 (1937)

Helvering v. Tex-Penn Oil Co.

No. 207

Argued December 14, 1936

Reargued February 1, 2, 1937

Decided March 29, 1937*

300 U.S. 481


1. Findings of circumstantial facts by the Board of Tax Appeals must be taken as established if supported by substantial evidence. P. 300 U. S. 490.

2. An "ultimate finding" by the Board of Tax Appeals, which is really a conclusion of law, or a determination of mixed law and fact, based on the Board's findings of primary, evidentiary, or circumstantial facts, is subject to judicial review, and, on such review, the court may substitute its judgment for that of the Board. P. 300 U. S. 491.

3. In pursuance of a plan of reorganization, the assets of an oil company and undivided interests in oil leases owned by individuals were conveyed to a new company, which delivered part of its shares and a sum of cash to the old company (later dissolved) and paid cash to the individuals. The Board of Tax Appeals, after finding the evidential facts, made an "ultimate finding" that the consideration moving to the old company from the new one included the cash delivered to the former as well as the shares, and upon that ground refused to apply the nonrecognition of gains provision (Rev. Act, 1918, § 202(b); Treas.Reg. 45, Art. 1567), and allowed deficiency assessments.


(1) The validity of the "ultimate finding" is to be tested by what in fact was done, rather than by the mere form of words used in the writings employed. P. 300 U. S. 493.

(2) The Board's findings of what was actually done show that the money advanced to the old company was no part of the consideration for its assets, but was part of the consideration for the individually owned lease interests, and was so advanced, by direction of the individuals, to pay the old company's debts

Page 300 U. S. 482

in order that its assets might be conveyed free and clear, as required by the plan, and was so applied, except a portion which was returned to the individuals pro rata. P. 300 U. S. 491.

4. Another "ultimate finding" of the Board, that the cash received by three of the individuals from the new company was consideration for both their stock in the old company and their interests in the leases, is clearly negatived by the circumstantial facts found by the Board, showing that this stock was assigned to the other two individuals before the assignment of the lease interests was made. The fact that the assignment of stock was to be returned if payment for the assignors' lease interests was not made before a certain date did not make the two sales a single or indivisible transaction. P. 300 U. S. 495.

5. A construction of Rev. Act, 1918, § 202(b), and T.R. 45, Art. 1567, contrary to previous construction and decision, never mentioned or considered in the proceedings under review, but advanced by the Commissioner of Internal Revenue for the first time in this Court after certiorari had been granted, will not be considered here. P. 300 U. S. 497.

6. Taxpayers are entitled to know the basis of law and fact on which the Commissioner seeks to sustain deficiency assessments. P. 300 U. S. 498.

7. Where shares of stock exchanged by a corporation for the assets of another corporation were highly speculative and were subject to a restrictive agreement preventing their sale and did not have a fair market value capable of being ascertained with reasonable certainty when they were acquired by the taxpayers, held that their ownership did not lay the basis for a computation of gain at the time they were received, or for a tax as of that date under Rev. Act, 1918, § 202(b); T.R. 45, Art. 1563. P. 300 U. S. 499.

83 F.2d 518, affirmed.

Certiorari, 299 U.S. 529, 530, to review a judgment overruling an order of the Board of Tax Appeals, 2 B.T.A. 917, redetermining deficiency tax assessments.

Page 300 U. S. 483

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