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BEARD v. S.C. TAX COMMISSION

December 17, 1956

EDWARD B. BEARD AND META A. BEARD, RESPONDENTS,
v.
SOUTH CAROLINA TAX COMMISSION, APPELLANT.



The opinion of the court was delivered by: Legge, Justice.

December 17, 1956.

The issue here is whether or not the shares of stock of Camden Equipment Company, Inc., received by the respondent Edward B. Beard pursuant to a certain plan for the merger, reorganization and consolidation of three South Carolina corporations owned by the respondent Edward B. Beard and other members of the family of H.E. Beard constituted taxable income of said respondents, who are husband and wife. Appellant having taken the position that the said shares so received were in fact a taxable distribution of surplus, and having therefore assessed against the respondents additional income taxes for the year ending December 1, 1953, in the amount of $448.07, together with $38.09 interest, respondents paid said amount under protest and brought this action to recover it, pursuant to Section 65-2662 of the 1952 Code, contending that said sock had been issued to and received by them as an integral part of a non-taxable merger, reorganization and consolidation within the meaning of Section 65-275.

The case was argued before the Honorable G. Badger Baker, presiding in the Fifth Judicial Circuit, upon an agreed statement of facts and of the positions of the parties respectively; and by his decree of January 23, 1956, he sustained respondents' contention and ordered appellant to refund the amount paid as aforesaid, with interest. Appeal is from that decree.

Prior to September 18, 1953, certain members of the family of H.E. Beard owned, in various combinations, of the capital stock of three South Carolina corporations engaged in related fields of business in Kershaw County, South Carolina. Specifically, these corporations and the ownership of the stock thereof were as follows:

Beard's Oil Company:

H.E. Beard, Sr. ...................................... 31%

Mary B. Beard. ....................................... 31% Beard Appliance Company:

H.E. Beard, Sr. ...................................... 50%

H.E. Beard, Jr. ...................................... 50%

Camden Petroleum Company:

H.E. Beard, Sr. ....................................... 2%

E.B. Beard. .......................................... 98%

Under date August 19, 1953, these three corporations and the incorporators of a proposed corporation to be known as Camden Equipment Company, Inc., entered into the following written agreement:

                "Agreement for Corporate Merger,
                Consolidation and Reorganization
"This Agreement made and entered into this 19th day of August, 1953, by, between and among Beard's Oil Company, Camden Petroleum Company and Beard Appliance Company, corporations existing under and by virtue of the laws of the State of South Carolina, each with its principal place of business in the City of Camden, County of Kershaw, State of South Carolina, and the incorporators of a proposed corporation to be known as Camden Equipment Company, Inc.

"Whereas, the respective directors of the aforesaid Beard's Oil Company, Camden Petroleum Company and Beard Appliance Company have deemed it advisable to consolidate the business activities of said corporations to promote more efficient, economical, and profitable conduct of said businesses through reduction of overhead, wider business contacts, and other means;

"Whereas, to effect such purposes the said directors deem it advisable to merge, consolidate and reorganize the said corporations; and

"Whereas, the incorporators of Camden Equipment Company, Inc., desire to become parties to this agreement to effect the aforesaid purposes and accomplish the desired consolidation, and reorganization of said corporations;

"Now, Therefore, in consideration of the mutual promises, covenants and agreements, and subject to the conditions and limitations hereinafter set forth, the parties hereto do agree as follows:

"1. That the directors of the respective corporate parties to this agreement do represent and agree that the said corporations have approximate net worth and book value, subject to current audit, as follows:

"(a) Beard's Oil Company, capital $5,000.00; Surplus $30,400.00;

"(b) Beard Appliance Company, capital $5,000.00; ...


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