Appeal from judgment of Court of Common Pleas of Dauphin County, No. 646 Commonwealth Docket, 1964, in case of Commonwealth of Pennsylvania v. Leonard D. Passell, Robert E. Behrman and Benjamin I. Lederman.
Harry J. Rubin, with him Krekstein and Rubin, for appellants.
Eugene J. Anastasio, Deputy Attorney General, with him Walter E. Alessandroni, Attorney General, for Commonwealth, appellee.
Bell, C. J., Musmanno, Jones, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Justice Jones. Dissenting Opinion by Mr. Justice Roberts.
This appeal presents a narrow issue: is the transfer of real estate from a corporation to its sole stockholders, pursuant to a plan envisioning a complete liquidation of the corporation, a transaction which is subject to tax under "The Realty Transfer Tax Act",*fn1 (the Act), of the Commonwealth? The Court of Common Pleas of Dauphin County held that it was. We disagree and reverse the judgment entered in the court below.
The factual background of this litigation has been stipulated. Craig Realty Corporation (Craig), a domestic
corporation, incorporated in 1953, maintained its business address in Pittsburgh. On or before July 19, 1962, Craig's total outstanding common stock consisted of ten shares which were owned by Leonard D. Passell, Robert E. Behrman and Benjamin I. Lederman (appellants). On July 19, 1962, by appropriate stockholder and director action, it was decided to terminate Craig's business and to distribute Craig's assets to its stockholders in August 1962. At that time appellants surrendered all their stock to the corporation secretary with instructions to mark the stock "cancelled" on the corporate books and this was done. In August 1962, Craig terminated its business and distributed all its assets. After August 22, 1962, Craig "conducted no business, owned no assets, had no liabilities, received no income and incurred no expenses" with the following exception:*fn2 since Craig had not been dissolved formally it continued to file a Pennsylvania Capital Stock tax report, showing a nominal $1,000 corporate stock value, upon which it paid a $5 tax and also a Corporate Net Income tax report, showing no income and one item of expense, to wit, the $5 capital stock tax.
Craig's sole remaining asset, prior to its distribution, was certain realty located in Pittsburgh and, on August 22, 1962, by deed, Craig distributed this realty to appellants. This deed was recorded August 22, 1962, and, at that time, appellants affixed to the deed Pennsylvania Realty Transfer tax stamps in the amount of $2500.
On January 6, 1964, the Realty Transfer Tax Division of the Commonwealth determined that there was a $4,000 realty transfer tax due in connection with Craig's distribution of said realty and that Craig owed a $1500 balance on said tax with interest from August 22, 1962. Appellants pursued the appropriate steps for
a re-determination of the tax and, finally, the Board of Finance and Revenue, on November 12, 1963, sustained the imposition of the tax. Appellants then appealed to the Court of Common Pleas of Dauphin County which affirmed the imposition of the tax and entered ...