(dissenting).
I must respectfully dissent from the decision expressed by the majority of this court which depends upon a literal interpretation of the phrase “its stockholders” contained in Section 104(a) of the Revenue Act of 1928.
The taxpayer, Mead Corporation, owns the revenue-producing stocks of certain power companies. Its stock is owned by the G. W. Mead Securities Corporation, and the Mead family in turn owns all of the stock of the Securities Corporation. The record convinces me as it convinced the Board and the majority of the court that the taxpayer was formed for the purpose of escaping the imposition of surtaxes for the year 1931 upon incomes of the individuals comprising the Mead family. The provisions of the statute would apply precisely to the taxpayer had not the corporate entity of the Securities Corporation been interposed by the Meads between themselves and their corporate pocketbook. The majority of thé court concludes that since the Securities Corporation is the taxpayer’s stockholder, the Meads are not, and therefore the Commissioner cannot put the taxpayer within the box of the statute despite the fact that the Securities Corporation is. merely a company which serves as an agent for and as a conduit to the Meads for the collection and payment of dividends declared by the taxpayer.
It has long been the law that the key to the proper interpretation of an act of Congress, is to be found in the congressional policy and purpose. Mercantile National Bank v. New York, 121 U.S. 138, 154, 7 S.Ct. 826, 30 L.Ed. 895; Helvering v. Stockholms Enskilda Bank, 293 U. S. 84, 55 S.Ct. 50, 79 L.Ed. 211. An examination of Section 104 makes it plain that it was the intention of Congress to tax a corporation used to accumulate gains and profits. The phrase “its stockholders” was meant to designate the persons who were really the owners of those gains and profits. In the case at bar those persons are the Meads. Though they have dropped into the picture a corporate entity designed to insulate the Mead Corporation from themselves they cannot defeat the congressional purpose thereby. The reality remains that the individuals used the taxpayer for the accumulation of gains and profits and the Securities Corporation for the control of that accumulation. For this reason the Mead Corporation incurs the tax.
In conclusion I must state that I do not attach to the amendment of Section 102 of the Revenue Act of 1934 the importance that my colleagues do. I think that the amendment was by way of clarification of the existing law.
In my opinion the decision of the Board of Tax Appeals should he affirmed.