*930 An amount received by a successor foreign corporation from the city of New York as a refund of taxes overpaid by a domestic predecessor is not included in the foreign corporation's gross income under section 119, Revenue Act of 1932.
*1156 The Commissioner determined a deficiency of $58,391.29 in petitioner's income tax for its fiscal year ended January 31, 1933. He *1157 included in petitioner's gross income an amount received from the city of New York as a refund of taxes erroneously paid by a predecessor corporation.
FINDINGS OF FACT.
Petitioner is a foreign corporation, organized February 12, 1932, under the laws of Newfoundland. On February 19, 1932, pursuant to a plan of reorganization, it issued its entire capital stock in exchange for substantially all the assets of the Suffolk Corporation, a Delaware corporation organized on April 19, 1929. At the same time it assumed the liabilities of Suffolk. On June 25, 1929, Suffolk had, pursuant to a plan of reorganization, assumed all the liabilities of Blair & Co., and issued its*931 entire capital stock in exchange for substantially all the assets of Blair & Co., Inc., a New York corporation, which was dissolved on July 8, 1929.
In 1923, 1924, and 1925 demand was made on Blair & Co. for payment of a tax imposed on "moneyed capital coming into competition with national banks" by chapter 897, Laws of New York, 1923, and in those years Blair & Co. paid a tax of $150,000, $150,000, and $180,000, respectively. Of the amount paid in 1924, $53,226.88 was refunded in May 1925. On its income tax returns for 1923, 1924, and 1925, Blair & Co. claimed deductions of $150,000, $150,000, and $126,773.12, respectively, on account of these taxes, and the deductions were allowed.
As parts of the plans of reorganization, Blair & Co. transferred to The Suffolk Corporation in 1929, and the Suffolk Corporation transferred to petitioner in 1932, all right, title, and interest in and to any refund which might be forthcoming to Blair & Co. on account of the amounts so paid by it as taxes. On June 15, 1932, petitioner received from the city of New York $426,773.12 as the balance of the refund due. In obtaining it, petitioner expended $45,009.40 as legal fees and miscellaneous*932 disbursements.
OPINION.
STERNHAGEN: The Commissioner's determination of deficiency includes several items of adjustment. The only one contested by petitioner is described in the notice of deficiency, without further explanation, as follows:
(i) Refund of New York City Money Capital Tax received by you during the taxable year is held to be taxable income.
| Amount received | $426,773.12 |
| Less: | |
| Legal expenses in connection therewith | 45,009.40 |
| Balance added to income | $381,763.72 |
*1158 The petitioner contends that this determination is incorrect, first, because as a foreign corporation its gross income from sources within the United States may include only those items enumerated in Revenue Act of 1932, section 119, subdivision (a), 1 of which this is not one; and second, because in any event the amount received from the city of New York as a refund of taxes originally overpaid by Blair & Co. is not income to petitioner, even if its gross income is to be tested by an omnibus description such as that of section 22, applicable to domestic corporations. For the respondent here there has been no argument in defense of his determination and no brief. The*933 facts were stipulated.
In , it was held that as to foreign corporations the income taxable was confined to that expressly*934 described in section 119. While there is room in subdivision (e) of that section for an expansion of the gross income found in the items of subdivision (a), such for example as the gain from the sale of personal property (see ), there is nothing in the entire section which would support the inclusion in a foreign corporation's gross income of a refund of overpaid city taxes. This alone requires the reversal of the Commissioner's determination and leaves unnecessary any decision upon the more general question whether the petitioner's receipt of the tax refund due to its predecessor would have been taxable to petitioner under section 22 because of the intervening reorganization.
Judgment will be entered under Rule 50.
Footnotes
1. SEC. 119. INCOME FROM SOURCES WITHIN UNITED STATES.
(a) GROSS INCOME FROM SOURCES IN UNITED STATES. - The following items of gross income shall be treated as income from sources within the United States:
(1) INTEREST. - Interest on bonds, notes, or other interest-bearing obligations of residents, corporate or otherwise, not including -
* * *
(2) DIVIDENDS. - The amount received as dividends -
* * *
(3) PERSONAL SERVICES. - Compensation for labor or personal services performed in the United States;
(4) RENTALS AND ROYALTIES. - Rentals or royalties from property located in the United States or from any interest in such property, including rentals or royalties for the use of or for the privilege of using in the United States, patents, copyrights, secret processes and formulas, good will, trade-marks, trade brands, franchises, and other like property; and
(5) SALE OF REAL PROPERTY. - Gains, profits, and income from the sale of real property located in the United States. ↩