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Manhattan Gen. Eqpt. Co. v. Commissioner, 297 U.S. 129 (1936)

Manhattan General Equipment Co. v.

Commissioner of Internal Revenue

No. 226

Argued January 8, 1936

Decided February 3, 1936*

297 U.S. 129


1. A loss resulting from the sale in 1926 of securities in respect of which a distribution pursuant to a plan of reorganization had been made, held properly determined, for the purpose of computing income tax under the Revenue Act of 1926, by the method prescribed by Art. 1599 of Treasury Regulations 65, as amended April 3, 1928, rather than by the original regulation promulgated August 28, 1926, where the effect of applying the original regulation would be to credit the taxpayer with a loss greatly disproportionate as between the stock in respect of which the distribution was made and the stock distributed, contrary to the provision of the statute which requires that the basis shall be "apportioned" between the old and the new stock. P. 297 U. S. 132.

2. To apportion is "to divide and assign in just proportion," "to distribute among two or more a just part or share to each." P. 297 U. S. 134.

3. The validity of an administrative regulation depends on whether it is consistent with the statute and reasonable. P. 297 U. S. 134.

4. Since the original regulation could not lawfully be applied in the circumstances of this case, because inconsistent with the statute and unreasonable, the amended regulation in effect became the

Page 297 U. S. 130

primary and controlling rule in respect of the situation presented, and was not void as retroactive. P. 297 U. S. 135.

76 F.2d 892 affirmed.

Certiorari, 296 U. S. 559, to review a judgment affirming a decision of the Board of Tax Appeals, 29 B.T.A. 395, sustaining determinations of deficiencies in income taxes in two cases. The cases were consolidated before the Board of Tax Appeals and disposed of by a single decision both by the Board and by the Circuit Court of Appeals.

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