ALBERS v. C. I. R,
414 U.S. 982 (1970)

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U.S. Supreme Court

ALBERS v. C. I. R , 414 U.S. 982 (1973)

414 U.S. 982

Norman E. ALBERS et al., Executors, Estate of Joseph Miele, et al.
No. 73-26.

Supreme Court of the United States

October 23, 1973

Rehearing Denied Dec. 10, 1973.

See 414 U.S. 1104.

On petition for writ of certiorari to the United States Court of Appeals for the Third Circuit.

The petition for a writ of certiorari is denied.

Mr. Justice POWELL, with whom Mr. Justice DOUGLAS and Mr. Justice BLACKMUN, join dissenting.

The five petitioners in this case own virtually all the outstanding stock of a small corporation, A & Transportation Company (A & S). The company operates a barge. The barge fell into such disrepair as to require replacement, but A & lacked the necessary resources and credit. A & requested the Federal Maritime Commission to guarantee, as it is empowered by law to do,

Page 414 U.S. 982 , 983

a proposed first mortgage loan from a bank. Before the Commission would extend its guarantee, it required to A & at least $150,000 of additional private capital. The Commission presented A & B with two options. A & could resort either to subordinated debt or to the issuance of nonvoting, nondividend paying, noncumulative preferred stock unredeemable until full payment of the desired loan.

A & chose the latter course. In proportion to their holdings of A & common, petitioners in 1959 purchased $150,000 of preferred stock possessing all the attributes required by the Commission. The loan was then consummated with the Commission's guarantee, and A & purchased a replacement vessel. By 1964 the loan was paid off in full. Having no further need for the $150,000, and in accord with the wishes of petitioners,1 A & redeemed the preferred stock in 1965 and 1966 in two equal installments. No premium was paid and petitioners received precisely the amount each had previously invested. The Commissioner of Internal Revenue treated the redemptions as the receipt of ordinary income, taking the view that they were 'essentially equivalent to a dividend' within the meaning of 302(b)(1) of the Internal Revenue Code of 1954, 29 U.S.C. 302(b)(1). Citing United States v. Davis, 397 U.S. 301 (1970), the Tax Court agreed. Joseph Miele et al., 56 T.C. 556 ( 1971); La Fera Contracting Co., T.C. Memo 1971-161. The Court of Appeals for the Third Circuit affirmed without published opinions. Miele v. Commissioner of Internal Revenue, 474 F.2d 1338 (1973); La Fera Contracting Co. v. Commissioner of Internal Revenue, 475 F.2d 1395 (1973); Spiniello v. Commissioner of Internal Revenue, 475 F.2d 1396 (1973). [414 U.S. 982 , 984]

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