Louis Brandeis

“ This preferred stock had substantially the same attributes as that involved in the Koshland Case. There the dividend was of common stock to a preferred stockholder, it is true; but we are of opinion that under the rule there declared Congress could have taxed this stock dividend. Nevertheless, by section 115 (f) it enacted in 1928, as it did in earlier and later Revenue Acts, that 'a stock dividend shall not be subject to tax.' The prohibition is comprehensive. It is so clearly expressed as to leave no room for construction. It extends to all stock dividends. ”

“ The questions for decision concern the taxation as income of a dividend in preferred stock and the proceeds received on its sale.
On June 29, 1929, the Hamilton Manufacturing Company, a Wisconsin corporation, had outstanding preferred stock of the par value of $100 a share and common stock without par value. On that day the directors declared from the surplus earnings a dividend of $14 a share on the common stock, payable on July 1, 1929, in preferred stock at its par value. Gowran, as owner of common stock, received as his dividend 533 and a fraction shares of the preferred. ”

“ It provides that: 'If the property was acquired by gift after December 31, 1920, the basis shall be the same as it would be in the hands of the donor or the last preceding owner by whom it was not acquired by gift.' And the basis for the computation on property transmitted at death is provided for in paragraph (5) of section 113 (a) , 26 U.S.C.A. § 113 note. ”