dissenting: Not only does the reasoning of the majority fail io convince me of the soundness of the conclusion that petitioner is entitled, in computing its net income, to deduct so much of the interest paid on the income tax deficiencies of its transferor corporations as accrued after the dates on which the property of the said corporations was transferred to the petitioner, but examination of the facts and the law leads me to the opposite conclusion. The petitioner, as stockholder, received in liquidation the assets of-.ten corporations. It received those assets as a trust fund, with a duty to account to the creditors of the corporations from which the assets were received, Phillips-Jones Corporation v. Parmley, 302 U. S. 233; Phillips v. Commissioner, 283 U. S. 589; Koch v. United States, 138 Fed. (2d) 850 (C. C. A., 10th Cir., Nov. 8, 1943); United States v. Snook, 24 Fed. (2d) 844; and McWilliams v. Excelsior Coal Co., 298 Fed. 884.1 One creditor of the dissolved corporations was the United States, and, taking advantage of the method of collection provided by section 311 of the Revenue Act of 1938, the United States proceeded to collect from the petitioner the liabilities of the dissolved corporations.' The liability of each such corporation to the United States included not only the deficiency in tax, but interest at the rate of 6 percent per annum from the .date prescribed for payment of the tax until assessment of the deficiency,2 and the facts show that the amount collected from the petitioner as transferee was in each instance made up of the deficiency in tax plus interest so computed. Furthermore, the liability of the petitioner to respond as trustee in respect of the liabilities of its transferors was limited only by the amount of the assets received, Phillips-Jones Corporation v. Parmley, supra, and Phillips v. Commissioner, supra, and there is no contention or suggestion of a contention that the assets of each of the transferor corporations received by the petitioner in distribution were insufficient to pay the deficiency of each such transferor plus the full amount of the interest thereon. To state the proposition differently, petitioner, as stockholder of the dissolved corporations, had been preindemnified against or for the liability to which it responded, for in no instance is it shown or claimed that it was, by reason of any of the payments here in question, actually out of pocket any amount over and above the amount of the funds received in liquidation of each of the said corporations.
It is conceded by the majority that, as to a taxpayer seeking the deduction of interest, only the amount which was his or “its interest as such” is deductible and that an amount representing the interest of another is not deductible, even though paid by the taxpayer. Lifson v. Commissioner, 98 Fed (2d) 508; certiorari denied, 305 U. S. 662; and Automatic Sprinkler Co. of America, 27 B. T. A. 160. It is also conceded that the liability of each of the transferor corporations included interest in the full amount collected, whether accrued before or after the distribution of assets. But, says the majority opinion, the liability of the transferee is imposed by section 311, supra, and in addition to the tax there is imposed oil the transferee by that section only so much of the interest of the transferor as had accrued at the date it distributed its assets, ergo any amount paid by a transferee representing interest accrued on the tax of its transferor after that date must of necessity be the interest of the transferee “as such” and therefore deductible by the transferee under section 23 (b) The obvious fallacy in the proposition stated is in the assumption that the liability of a transferee of property is imposed by section 311. If any proposition is clear from the language of the statute itself and from the cases applying it, it is that the transferee sections of the various revenue acts impose no liability of any kind on anyone, but merely provide a new or more summary method for the collection of existing liabilities.3 The liability collectible from a transferee under section 811 is plainly stated as the liability “at law or in equity, of a transferee of property of a taxpayer, in respect of the tax (including interest, additional amounts, and additions to the tax provided by law) imposed upon the taxpayer by this title.” In so far, then, as the origin, nature, and character of the liabilities are concerned, the transferee section of the statute leaves transferees exactly where it finds them. Long prior to the enactment of the transferee provisions of the various acts, it was well settled under the trust fund doctrine that a stockholder receiving the assets of a corporation in distribution was liable for the debts of the corporation, the only limitation being the amount of the assets received. Phillips-Jones Corporation v. Parmley, supra, and Phillips v. Commissioner, supra. The facts here show that the amount collected in respect of each taxpayer transferor was exactly the amount of its tax and interest as imposed by the revenue acts, and, as noted in the preceding paragraph, there is no showing or claim that any amount as interest or otherwise in excess of the amounts of the respective trust funds was charged against or paid by petitioner. Such being the case, the conclusion that petitioner paid no amounts qua tax or qua interest is in my opinion inescapable.
That is not to say, however, that under no circumstances is a transferee chargeable with interest qua interest on the amount received as distributee of a debtor corporation. United States v. Snook, supra; R. T. Buzard, 29 B. T. A. 981; Frederick L. Watson, 25 B. T. A. 971; Edward H. Garcin, 22 B. T. A. 1027; and Henry Cappelini, 16 B. T. A. 802. It is well settled as a matter of general law that where a party receives a fund impressed with a trust and fails to apply it to the uses with which it is impressed, or appropriates it to his own use, such party may be required not only to restore the fund itself or pay over an amount equal thereto, but in addition riiay be required to respond in interest, usually at the legal rate prescribed by state iaw, for the period of such withholding or misappropriation.4 In the cases cited, the assets of the transferor received by the transferee were sufficient to pay only a part of the transferor’s liability for tax and interest, and the interest actually charged and paid was not interest on the deficiency chargeable against the taxpayer transferor under section 292 and payable by the transferee under his duty to account to creditors of the transferor for assets received in distribution, as in the instant case, but was interest chargeable against the transferee himself, at the legal rate prevailing in the particular state, not for failure to pay a tax when due, but for the improper withholding or use of the trust fund. The petitioner here was charged with and paid no such interest, and, inasmuch as the liability of each transferor for both tax and interest has by application of the trust fund doctrine been settled in full, it is, of course, obvious that interest never will be charged against the transferee here, as was done in the Snook, Busard, Watson, Garcin, and Gappelini cases above. It should also be noted in passing that, inasmuch as the assets received by the petitioner here were in each instance sufficient to have paid the full liability of the transferor for its tax plus accrued interest, a charge of interest against the petitioner on the same basis as the interest charged in the cases discussed in this paragraph would have resulted not in the payment of interest on the amount of the deficiency only as was true here, but in the payment of interest on interest as well as interest on the amount of the deficiency in tax. The facts show that no such interest was charged or collected.
Other than to say that argument in support of a contrary conclusion “rests upon an attenuated and unjustified application * * * of the so-called trust fund doctrine,” no attempt is made in the majority opinion to reconcile the holding therein with the principles laid down in the cases previously cited in this dissent and in numerous cases decided by this and other courts outlining the nature, scope, and applicability of the trust fund doctrine, and yet Koch v. United States, supra, reviewing the law of the case and reaching the opposite conclusion, was decided by the United States Circuit Court of Appeals for the Tenth Circuit as recently as November 8, 1943. If I am able to read the majority opinion aright, the conclusion that section 311, supra, imposes on the transferee “as its interest” so much of the interest as accrues after the transfer of assets rests not upon the language of the statute nor upon the decided cases, but upon language appearing in the reports of the Finance Committee of the Senate and of the Conference Committee, of the 69th Congress, 1st session, dealing with section 280 of the bill which became the Revenue Act of 1926, that section being the first of the transferee sections of the various revenue acts. The Senate Finance Committee did have in mind, and the Senate adopted, a provision limiting the interest in-cludable in “the liability of the transferee” to that which had accrued against the transferor at the time of the transfer of assets.5 In conference, however, the section was completely rewritten in the form in which it now appears, and the provision restricting and limiting the interest includable in “the liability of the transferee,” as passed by the Senate, was omitted. The section as enacted does not, as the majority here concludes, impose any interest “as such” upon the transferee or anyone else, and the majority opinion is wholly silent as to where-and in what language the imposition occurs. Nor does the said section, as might be and seemingly has been inferred from some of the language contained in the Conference Committee report, contain any provision limiting the interest liability of the transferor collectible from the transferee under the trust fund doctrine to the interest which had accrued at the time of the transfer of the assets. The interest at 6 percent per year “for reimbursing the Government at the usual rate for loss of the use of the money due it,” referred to in the Conference Committee report, obviously deals with interest chargeable under general law and at prevailing state rates for the improper withholding or misappropriation of a fund impressed with a particular use, as in United States v. Snook, supra, and companion cases, but which, as previously noted, will never be charged or collected in the instant case, inasmuch as the assets of the transferor received by the petitioner were in each instance sufficient to satisfy the liability of the transfer for both tax and interest and such liability has been satisfied by invoking and applying the trust fund doctrine.
For reasons set forth above, I am unable to find any basis in fact or in law for the deduction by the petitioner as interest of any part of the amounts paid by it in respect of the liability of the various transferor corporations, and respectfully note my dissent.
Kern, J., agrees with this dissent.In McWilliams v. Excelsior Coal Co., the court stated the theory to be “that such assets are a trust fund against which the corporate creditors have a prior claim before the stockholders,’ and In United States v. Snooks, it was said that “In the language of equity the stockholder so receiving corporate assets takes them as a trustee, with a dutv t* account to the creditor/’
Sec. 202, Revenue Acts of 1028 and 1084.
Phillips v. Commissioner, supra; Phillips-Jones Corporation v. Parmley, supra; Hulburd v. Commissioner, 206 U. S. 300; Tooley v. Commissioner, 121 Fed. (2d) 350; Continental Oil Co. v. Helvering, 100 Fed. (2d) 101; Irvine v. Helvering, 99 Fed. (2d) 265; Michael v. Commissioner. 75 Fed. (2d) 966; certiorari denied, 296 U. S. 579; Commissioner v. Oswego Falls Corporation, 71 Fed. (2d) 673; Harwood v. Eaton, 68 Fed. (2d) 12; certiorari denied, 292 U. S. 636; Liquidators of Exchange National Bank of Shreveport v. United States, 65 Fed. (2d) 316; Hatch v. Morosco Holding Co., 50 Fed. (2d) 138; certiorari denied, 284 U. S. 668; United States v. First Huntington National Bank, 34 Fed. Supp. 578; affd., 117 Fed. (2d) 376; Suisman & Blumenthal, Inc v. Eaton, 4 Fed. Supp. 763; affd., 74 Fed. (2d) 716; United States v Prince, - Fed. Supp. - (U. S D. C., So. Dist. of New York, March 19, 1942); Fostoria Milling & Grain Co., 11 B. T. A 1401; A. H. Graves, 12 B. T. A. 124; Wire Wheel Corporation of America, 16 B. T. A. 737; affd., 46 Fed. (2d) 1013; Phil Gleichman, 17 B. T. A. 147; American Trust Co., Trustee, 18 B. T. A. 580; South Penn Oil Co., 20 B. T. A. 1180; reversed on another point, 68 Fed. (2d) 420; William A. Moorhead, 22 B. T. A. 858; A. V. Stegeman, 25 B. T. A. 949; American Equitable Assurance Co. of New York, 27 B T. A. 247; affd., 68 Fed. (2d) 46 Shamrock Oil Co., 29 B. T. A. 910; affd., 77 Fed. (2d) 553; certiorari denied. 296 U. S. 632; Paulyn B. Tomfohr, 44 B. T. A. 730; Fletcher Trust Co., Trustee, 1 T. C. 798.
See 33 Corpus Juris, pages 182, and 200 to 204, for general rules allowing Interest in instances not expressly covered by contract or statute. See also Agency of Canadian Car & Foundry Co., Ltd. v. American Can Co., 258 Fed. 363, 371. and following, for discussiori generally of rules allowing interest at law and in equity.
Section 280 (e), H. R. 1, 60th Cong., 1st sess. In the Senate of the United States, February 1 (calendar day, February 12), 1926.