Mahlon Pitney, United States v. Phellis — Opinion of the Court
“ It is the appropriate function of a dividend to convert a part of a surplus thus accumulated from property of the company into property of the individual stockholders; the stockholder's share being thereby released to and drawn by him as profits or income derived from the company. ”
Mahlon Pitney, United States v. Phellis — Opinion of the Court
“ That the distrubution reduces the intrinsic capital value of the shares by an equal amount is a normal and necessary effect of all dividend distributions-whether large or small and whether paid in money or in other divisible assets-but such reduction constitutes the dividend none the less income derived by the stockholder if it represents gains previously acquired by the corporation. ”
Mahlon Pitney, United States v. Phellis — Opinion of the Court
“ The liability of a stockholder to pay an individual income tax must be tested by the effect of the transaction upon the individual. It was a part of the purpose and a necessary result of the plan of reorganization, as carried out, that common stock of the new company to the extent of $58,854,200 should be turned over to the old company, treated by it as assets to be distributed as against its liability to stockholders for accrued surplus, and thereupon distributed to them 'as a dividend.' The assent of the stockholders was based upon this as a part of the plan. ”
