## Facts

- Marvin E. Singleton, Jr., and his wife were individual taxpayers and shareholders of Capital Southwest Corporation (CSW), a parent corporation of an affiliated group.
- CSW and its affiliates filed consolidated federal income tax returns for fiscal years ending March 31, 1964 and March 31, 1965, allowing one subsidiary’s income to be offset by CSW’s losses.
- A subsidiary, Capital Wire & Cable Corporation (CW), recognized an estimated consolidated-return tax saving of about $863,000 for the two fiscal years.
- In March 1965, CW distributed $1 million ratably to its shareholders; CSW received $803,750 as the principal shareholder.
- The IRS later determined the consolidated returns did not accurately reflect group earnings; asserted deficiencies were settled in 1972 for about $900,000, with about $755,000 allocated to CW.
- Singleton contended CW’s 1965 payment to CSW should be treated as CW’s constructive payment of its share of consolidated tax liability, reducing CSW’s 1965 earnings and profits and rendering CSW’s 1965 distribution to Singleton a nontaxable return of capital.
- The Tax Court (in a reviewed decision) agreed with Singleton and treated the CSW distribution as a nontaxable return of capital.
- The Fifth Circuit reversed and held the CSW distribution to Singleton was a taxable dividend.
- The Supreme Court denied certiorari; Justice Blackmun, joined by Justices Marshall and Powell, dissented from the denial.

## Issues

1. Whether the Supreme Court should grant certiorari to review the Fifth Circuit’s tax characterization of the 1965 shareholder distribution.
2. Whether a denial of certiorari implies any approval or disapproval of the lower court’s merits ruling.
3. (Underlying merits question presented below) Whether the 1965 cash distribution to Singleton was taxable as a dividend or instead a nontaxable return of capital in light of consolidated-return tax effects and later deficiency adjustments.

## Decision

- The Supreme Court denied the petition for a writ of certiorari.
- The denial left the Fifth Circuit’s judgment in effect, including its holding that the 1965 distribution was taxable as a dividend.
- Justice Blackmun dissented from the denial, stating the issue warranted review due to its importance in administering the income tax laws.

## Legal Principles

- A bare denial of certiorari does not constitute a decision on the merits and should not be treated as expressing any view on the correctness of the lower court’s ruling.
- Denial of certiorari reflects only that fewer than four Justices voted to hear the case; the Court generally provides no reasons for such denials.
- When certiorari is denied, the lower court’s judgment remains operative and binding on the parties.

## Conclusion

The Supreme Court’s denial of certiorari carried no merits significance but left standing the Fifth Circuit’s determination that the 1965 distribution to Singleton was a taxable dividend rather than a nontaxable return of capital, despite a dissent arguing the consolidated-return earnings-and-profits question warranted review.


Singleton v. Commissioner of Internal Revenue, 439 U.S. 940 (1978)