CIR vs CA, Court of Tax Appeals and A. Soriano Corp

COMMISIONER OF INTERNAL REVENUE, petitioner, vs. THE COURT OF APPEALS, COURT OF TAX APPEALS and A. SORIANO CORP., respondents.

G.R. No. 108576 | 1999-01-20

Common stock
Equality of shares doctrine
Exchange
Preferred stock
Trust fund doctrine
Conversion of Preferred Shares to Common Shares and vice-versa, tax consequences

No income is realized by the stockholders upon the reclassification of common shares into preferred shares
Taxable dividends
Trust fund doctrine
Common stock
Equality of shares doctrine
Exchange
Exchange of property, stock or securities related to reorganizations no taxable gain or loss
No taxable gain or loss may be recognized on exchange of property, stock or securities related to reorganizations
Reclassification of shares, effect
Preferred stock
Common and preferred stock distinction

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Petitioner Commissioner of Internal Revenue (CIR) seeks the reversal of the decision of the Court of Appeals (CA)^[1] which affirmed the ruling of the Court of Tax Appeals (CTA)^[2] that private respondent A. Soriano Corporation’s (hereinafter ANSCOR) redemption and exchange of the stocks of its foreign stockholders cannot be considered as essentially equivalent to a distribution of taxable dividends” under Section 83(b) of the 1939 Internal Revenue Act^[3]

The undisputed facts are as follows:

Sometime in the 1930s, Don Andres Soriano, a citizen and resident of the...