Statement by the President Upon Approving Bill Relating to Distribution of General Motors Shares.

I HAVE approved H.R. 8847, entitled "An Act to amend the Internal Revenue Code of 1954 so as to provide that a distribution of stock made to an individual (or certain corporations) pursuant to an order enforcing the antitrust laws shall not be treated as a dividend distribution but shall be treated as a return of capital; and to provide that the amount of such a distribution made to a corporation shall be the fair market value of the distribution."

H.R. 8847 adds several new provisions to the Internal Revenue Code of 1954 which are designed to affect the income tax treatment of certain taxpayers who may receive a distribution of General Motors stock pursuant to a court order requiring E. I. du Pont de Nemours and Company (and, possibly, Christiana Securities Corporation) to divest itself (or themselves) of such stock pursuant to the du Pont antitrust case (United States v. E. I. du Pont de Nemours and Co., et al, 365 U.S. 806 (1961)). The bill applies only if the court orders the distribution to be completed within three years or less from the date the court order becomes final.

In general, the bill provides that the receipt of General Motors stock pursuant to a court order in the du Pont antitrust case by individual shareholders (or any shareholder which is not entitled to the corporate dividends received deduction) will be treated as a return of capital, and its fair market value will reduce the basis of the stock with respect to which the distribution is made. In those instances where the fair market value of the General Motors stock exceeds the basis of the stock with respect to which the distribution is made, such excess will be taxed as capital gain. If this bill were not enacted, such individual shareholders would be required to pay an ordinary income tax on the full fair market value of the General Motors stock received.

With the exception of Christiana Securities Corporation, the bill does not alter the tax treatment of those corporations which, as stockholders, may receive a distribution of General Motors stock pursuant to court order. Under existing law these corporate stockholders will be required to pay a tax at ordinary income rates measured by the basis of the stock to the distributing corporation (i.e., basis of General Motors stock to E. I. du Pont de Nemours and Company or Christiana Securities Corporation immediately prior to the distribution) less the 85 percent intercorporate dividends received deduction.

The bill will impose on Christiana Securities Corporation a higher income tax than will be imposed, under existing law, upon other corporate shareholders to which General Motors stock may be distributed. Christiana has made it clear to the Treasury Department and the Congress, however, that the benefits to it and to its stockholders from the entire legislation justify this tax.

At the same time this legislation was before the Congress, the United States District Court for the Northern District of Illinois had before it the litigation to determine what method of distribution of the General Motors stock should be adopted in order to carry out the Supreme Court decision. No final divestiture decree has yet been rendered. The Department of Justice is urging the District Judge to require Christiana to sell the General Motors stock which it would receive as a stockholder of du Pont so that the stock would not pass through to Christiana stockholders. If the pass-through occurred, a large percentage of General Motors stock would be acquired by members of the du Pont family. This, it is argued, would mean that the du Pont family would still effectively control both du Pont and General Motors.

This legislation clearly does not attempt to express a judgment upon the question that is now before the court. The Senate Finance Committee report pointed out that all issues dealing with the manner of divestiture should be determined judiciously, solely with reference to antitrust principles, and without regard to the provisions of the bill before it. The debate discloses a unanimity of intent on this point. Both the proponents and the opponents of the bill agreed that the antitrust questions, particularly the question whether the pass-through of stock to Christiana stockholders should be permitted, should not be affected in any way by the legislation.

In view of this unequivocal construction of the legislation, I am approving it. It should be clearly understood that neither the Congress nor I have approved a divestiture which will permit the stock of General Motors to pass-through Christiana to the stockholders of Christiana. The tax impact upon stockholders of du Pont who may receive General Motors stock in the divestiture decree by the District Judge will be affected. However, the court should not be influenced in its determination as to what relief is appropriate to carry out the decision of the Supreme Court, and the Department of Justice should not be prejudiced in any way in its effort to enforce the antitrust decision of the Supreme Court by this legislation.