- 55 -
prevent the government from correctly ascertaining and
collecting the sums as taxes that are justly due it.
Schlafly v. United States, * * * [4 F.2d 195 (8th Cir.
1925)] 8 Cir., 4 F.2d 195 at page 200; Atlantic City
Electric Co. v. Commissioner, 288 U.S. 152, 154, 53
S.Ct. 383, 384, 77 L.Ed. 667.
The Commissioner and the Board, in the construc-
tion of the acts prior to 1926, generally, whenever the
question was raised, followed this rule, that the stock
which must be taken into consideration in determining
whether grounds for affiliation exist, was stock having
a right to control the management of a corporation, as
in the election of directors.
With such an established and recognized construc-
tion by the Department, Congress in enacting the 1926
and 1928 acts should be held to mean by "nonvoting
stock" stock not having the right to vote for directors
who control the management of the corporation. * * *
* * * * * * *
"Voting stock may very properly be termed manage-
ment stock." * * * [Erie Lighting Co. v. Commissioner,
supra at 884-885.]
The court in the Erie Lighting Co. case also quoted with approval
the following statement in Commissioner v. Shillito Realty Co.,
39 F.2d 830, 832 (6th Cir. 1930), affg. 8 B.T.A. 665 (1927):15
15 Petitioners contend on brief that the analysis in Commis-
sioner v. Shillito Realty Co., 39 F.2d 830 (6th Cir. 1930), affg.
8 B.T.A. 665 (1927), "conflicts with, and must therefore yield
to, [the analysis] * * * of two subsequent decisions of the
Supreme Court," viz, Atlantic City Elec. Co. v. Commissioner, 288
U.S. 152 (1933), and Burnet v. Howes Bros. Hide Co., 284 U.S. 583
(1931) (per curiam). Not only did the court in Erie Lighting Co.
v. Commissioner, 93 F.2d 883 (1st Cir.), revg. 35 B.T.A. 906
(1937), the principal case on which petitioners rely to support
their mechanical test, quote with approval the above statement
from the Shillito case, it expressly found that that statement
was "in no way opposed" to the Supreme Court decision in Handy &
Harman v. Burnet, 284 U.S. 136 (1931), the controlling authority
on which the Supreme Court relied in deciding the Atlantic City
(continued...)
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