The Accounting Review Vol. 11 No. 4 1936
TAXABILITY OF STOCK DIVIDENDS UNDER FEDERAL AND STATE LAWS.
Abstract
The article deliberates on whether the stock dividends should be considered as income in hands of the recipient. Numerous views are being given on the subject. However, the views expressed are conflicting because different aspects of the problem are being emphasized by different persons. Under the series of Federal income tax laws since the sixteenth amendment was passed in 1913, dividends have been subject to tax in the hands of the recipient. The act contained no mention of stock dividends, but the Bureau of Internal Revenue interpreted the law to include stock dividends as income and hence subject to tax. This interpretation was questioned by a taxpayer, H.R. Towne, who carried the case to the United States Supreme Court. The court decided in favor of the taxpayer, declaring that stock dividends were not taxable as income under the act. The court ruled that a stock dividend really takes nothing from the property of the corporation, and adds nothing to the interest of the shareholders. Its property is not diminished and their interests are not increased. The proportional interest of each shareholder remains the same.
- DOI
- 10.2308/tar-7076468
- Volume
- 11
- Issue
- 4
- Pages
- 373-387
- Language
- en
- Sources
- openalex crossref