The opinion of the court was delivered by: Moss, Justice.
It appears from the complaint that in 1929 Roper Motor Company was organized as a business corporation under the laws of this State and had an authorized capital stock of $6,000.00, divided into 60 shares of common stock, all owned by J.A. Roper. In the year 1951, the charter of Roper Motor Company was amended to provide for the issuance of preferred stock of the part value of $124,000.00, represented by 1,240 shares with a par value of $100.00 each. The corporation issued this preferred stock to J.A. Roper as a stock dividend, and appropriate entries were made upon the books of the corporation, resulting in the surplus account of the corporation being decreased by $124,000.00 and the capital stock account increased by the same amount. J. A. Roper did not report this stock dividend as income in his income tax return for the year 1951, and upon an examination of the return by the Tax Commission, an additional assessment was made, resulting in the payment thereof under protest, and this suit was brought to recover the payment so made.
The respondent demurred to the complaint upon the ground that the complaint fails to state a cause of action for the reason that it appears that J.A. Roper received, in 1951, a stock dividend by way of preferred stock, which said dividend constituted income within the meaning of the "Income Tax Act of 1926" — Section 65-201 et seq., 1952 Code of Laws of South Carolina. The lower Court sustained the demurrer interposed by the respondent, thereby holding that the preferred stock dividend declared by Roper Motor Company was income and subject to income tax. From the order sustaining the demurrer, the appellants prosecute this appeal. The case is before this Court upon a number of exceptions. These exceptions pose one question: "Is the dividend of preferred stock by a corporation, whose outstanding stock was all common stock and owned by one individual, taxable as income to the owner of the common stock?"
It is elementary that in passing upon a demurrer, the Court is limited to a consideration of the pleadings under attack, all of the factual allegations whereof that are properly pleaded are for the purpose of such consideration deemed admitted. Spell v. Traxler, 229 S.C. 466, 93 S.E.2d 601. If a complaint states any cause of action, a demurrer should not be sustained. Fleming v. Pioneer Life Ins. Co., 178 S.C. 226, 182 S.E. 154. It has also been held that when a fact is pleaded, whatever inferences of law or conclusions of fact may properly arise from it, are to be regarded as embraced in such averment. Bryant v. Smith, 187 S.C. 453, 198 S.E. 20.
In sustaining the demurrer interposed by the respondent, the lower Court determined that a stock dividend declared out of the accumulated surplus of a corporation, and paid in preferred stock to the sole owner of the common stock, which was the only class of stock outstanding, was income to the recipient stockholder within the meaning of "The Income Tax Act of 1926".
The appellants assert that the issuance of the preferred stock here involved is not taxable under the Federal Income Tax Law, 26 U.S.C.A. § 1 et seq. They further assert that the State Income Tax Act was a model of the Federal Act, and the United States Supreme Court having construed the Federal Act to mean that a stock dividend is not "income", and inasmuch as these decisions had been made and were known prior to the adoption of our State Income Tax Act, that the General Assembly of this State intended to adopt the definition of "income" therein contained. For this reason the appellants assert that the respondent should likewise consider the stock dividend here involved to be nontaxable.
In 1918, in the case of Towne v. Eisner, 245 U.S. 418, 38 S.Ct. 158, 62 L.Ed. 372, the United States Supreme Court held that a stock dividend was not income within the meaning of the Revenue Act of 1913, 38 Stat. 114. It was not necessary in this case to pass upon the question of whether a stock dividend was income within the meaning of the Sixteenth Amendment to the Constitution of the United States. Congress had, in the meantime, provided that a stock dividend should be considered income to the amount of its cash value. When this provision of the Act was interpreted by the United States Supreme Court, it was held that a dividend in common stock, paid on common stock, was not income within the meaning of the Sixteenth Amendment, chiefly for the reason that income had not been severed from capital or realized by a distribution. Hence, the Federal Government was without authority to tax a stock dividend as income. Eisner v. Macomber, 252 U.S. 189, 40 S.Ct. 189, 64 L.Ed. 521, 9 A.L.R. 1570. Although this decision dealt only with a dividend of common stock to common stockholders, it was accepted as a basis for a broader exemption. Congress provided in the Revenue Act of 1921 that "A stock dividend shall not be subject to tax. * * *" 42 Stat. 227, § 201 (d). This provision continued in all the subsequent Revenue Acts up to and including that of the year 1936.
We will not further discuss or trace the history of the provisions in the Revenue Acts in respect to Federal income taxation of stock dividends and the Treasury regulations thereunder. It is set forth fully in the case of Helvering v. Griffiths, 318 U.S. 371, 63 S.Ct. 636, 87 L.Ed. 843.
However, we do call attention to the case of Helvering v. Sprouse, 318 U.S. 604, 63 S.Ct. 791, 87 L.Ed. 1029, where it was held that a stock dividend of preferred stock by a corporation whose outstanding stock was common stock, all owned by one individual, is not taxable income to the owner of the common stock under the Revenue Act of 1936 [26 U.S.C.A. (I.R.C. 1954) § 305].
The appellants invoke the doctrine set forth in Fulghum v. Bleakley, 177 S.C. 286, 181 S.E. 30, that where the language incorporated into a statute is identical, or substantially identical, with that appearing in similar statutes of other states, which have received judicial construction and interpretation, prior to the adoption of the statute under consideration, in the absence of an expressed intention to the contrary, it will be presumed that the subsequently enacted statute was intended to be understood and applied in accordance with the construction given it by the courts of the states which had first adopted it. The foregoing rule of construction was fully set out in Fuller v. South Carolina Tax Commission, 128 S.C. 14, 121 S.E. 478. This brings us to a consideration of the question of whether "The Income Tax Act of 1926", now contained in Section 65-201 et seq., 1952 Code of Laws of South Carolina, contains identical, or substantially identical, language as that appearing in the Federal Income Tax Law.
It is provided in art. 10 — Section 1, of the 1895 Constitution of South Carolina: * * * "That the General Assembly may provide for a graduated tax on incomes, * * *."
We do not intend to discuss the history of the income tax law in this State. However, it appears that the first income tax law was enacted on March 5, 1897, and appears in 22 Stats. at 529. This income tax law was codified in Section 325 et seq., of the 1902 Code of Laws of South Carolina. A subsequent codification appeared in Section 354 et seq., of the 1912 Code of Laws of South Carolina.
By Act No. 502, approved March 13, 1922, 32 Stats. 896, the General Assembly of this State adopted "An Act to Raise Revenue for the Support of the State Government by ...