Veto of Bill for the Relief of Gale P. and Julia Fay Haun.

To the Senate:

I return herewith, without my approval, S. 674, entitled "AN ACT for the relief of Gale P. Haun and Julia Fay Haun".

The bill would provide that, for the purpose of determining the individual liability for income taxes for the taxable year 1953 of Gale P. Haun and Julia Fay Haun, sole stockholders of River Grange Company, Incorporated, which was liquidated pursuant to a plan of complete liquidation adopted on December 24, 1953, the elections of Gale P. Haun and Julia Fay Haun to have the benefits of section 112 (b) (7) (A) of the Internal Revenue Code shall be considered to have been filed within thirty days after the adoption of such plan. The bill states that the mailing of such election was delayed, without negligence or fault on the part of such stockholders, beyond the thirtieth day following the adoption of such plan.

Section 112 (b) (7) of the Internal Revenue Code of 1939 provides a special rule in the case of certain complete liquidations of domestic corporations occurring within one calendar month for the treatment of gain on the shares of stock owned by qualified electing shareholders. The effect of this section is to permit deferral of tax upon unrealized appreciation in the value of the property distributed in liquidation. An election to be governed by section 112 (b) (7) must be filed by the shareholder or by the liquidating corporation with the Commissioner of Internal Revenue on or before midnight of the 30th day after adoption of the plan of liquidation. The bill would waive this requirement for the named taxpayers.

The records of the Treasury Department show that River Grange Company, Incorporated, adopted a plan of complete liquidation on December 24, 1953. The Internal Revenue Service began an examination of the return of this corporation on September 9, 1954, and a question arose as to whether the stockholders had filed an election under section 112 (b) (7). It was found that no such election had been filed. A representative of the taxpayers has advised that an election was mailed on or about September 10, 1954, which date was more than seven months after the expiration of the statutory period for filing the election.

Except in the case of special circumstances, the enactment of special legislative relief for a taxpayer who has not made an election within the time prescribed by law constitutes an inequitable discrimination against other taxpayers similarly situated. The primary extenuating circumstance on which the taxpayers appear to rely in this instance is that a professional advisor, upon whom the taxpayers were accustomed to depend in legal matters, was incapacitated by illness six months prior to the adoption of the plan of liquidation so that the taxpayers were compelled to rely on other professional advisors. The circumstances of this case do not seem to justify special legislative relief.

The granting of special relief in this case would constitute an equitable discrimination against other taxpayers similarly situated and would create an undesirable precedent which might encourage other taxpayers to seek relief in the same manner.

Under the circumstances, therefore, I am constrained to withhold my approval of the bill.

DWIGHT D. EISENHOWER