Owen J. Roberts

“ Congress desired to encourage the payment of dividends so that the earnings of corporations might be subjected not only to normal tax as against the corporation, but also to taxation as income to the stockholders. [6] The means adopted was to relieve the corporation from surtax to the extent of dividends paid in cash or in obligations. ”

“ Dividends in kind are to be valued and treated as cash dividends. Subsection (e) provides that, in computing the basic surtax credit, a dividend paid in obligations of the corporation shall be treated as a cash dividend in the amount of the face value of the obligations or their market value, whichever is lower, and that, if the obligations are redeemed in a subsequent year, any excess paid the holders over the market value at date of issue shall be treated as a dividend paid in that year. ”

“ With this knowledge it adopted the sweeping language of § 27 (a) (4) of the Act of 1938. As introduced the section spoke only of indebtedness. It was amended by the Senate Finance Committee by adding the words 'of any kind' after the word 'indebtedness', for the purpose of clarification. ”