Case ID: us-ct-cl_153/html/0622-01.html
Source: Caselaw Access Project
Author: {"author": "MaddeN, Judge, Whitaker, Judge,\n    ", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

L. B. MAYTAG, JR., AND LUCRETIA D. MAYTAG v. THE UNITED STATES
    [No. 348-57.
    Decided May 3, 1961]
    
      
      Claude M. Maer, Jr., for the plaintiffs. James L. White was on the briefs.
    
      John F. Palmer, with whom was Assistant Attorney General Louis F. Oberdorfer, for the defendant. James P. Garland, Lyle M. Turner and Harold S. Larsen were on the briefs.
   MaddeN, Judge,

delivered the opinion of the court:

The plaintiffs seek in this suit to recover $22,406.06 of the income tax which was collected from them for the year 1952. Their claim for refund was timely filed, and this suit was timely brought. The plaintiff Lucretia D. Maytag signed the income tax return with her husband L. B. Maytag, Jr., but all of the activities with which this suit is concerned were those of L. B. Maytag, Jr., and the word plaintiff as used hereinafter will refer to him alone.

The ground on which the plaintiff bases his claim is that he had a bad debt loss which was deductible in full from his 1952 income, in computing his tax. The occurrence and the amount of the loss are undisputed. The principal dispute is as to whether the loss debt was a “business debt” or a “non-business debt.” If it was the former, the plaintiff is entitled to recover. The Government says it was a non-business debt. The Government makes another contention which will be discussed hereinafter.

Section 23 (k) (1) of the Internal Revenue Code of 1939, as amended, 26 U.S.C. (1952 ed.) § 23 (k) (1) provides that in computing net income there shall be allowed as deductions “Debts which become worthless within the taxable year;” but goes on to say that the foregoing shall not apply, in the case of an individual tax payer, with respect to a non-business debt, as defined in paragraph (4) of subsection (k) of section 23.

Paragraph (4) says, in effect, that if a non-business debt becomes worthless within the taxable year the loss shall be treated as a short-term capital loss is treated. That means that it cannot be deducted from net income except to a very limited extent but can be set off against certain kinds of capital gains, if the tax payer has such gains. See 26 U.S.C. (1952 ed.) § 117(j). Paragraph (4) then says:

The term “non-business debt” means a debt * * * other than a debt the loss from the worthlessness of which is incurred in the taxpayer’s trade or business.

We must, then, determine whether the debt here in question, and its uncollectibility, were incurred in the plaintiff’s trade or business.

The uncollectible debt was the debt of Maytag-Waynick, Inc., a corporation to which the plaintiff had made advances of $205,000 and which had repaid only $3,600, the balance of $201,400 being admittedly uncollectible. The plaintiff says that Maytag-Waynick, Inc., was one feature of his general business of carrying on activities connected with the airplane industry.

Since 1947, when he was 21 years old, the plaintiff has been engaged solely in business connected with aviation. In 1948 he purchased the assets and business of Midwestern Air Service, and carried on the business as a sole proprietorship until 1951. The extensive aviation-connected activities of the plaintiff in this individual business are listed in finding 2. In January 1951 the plaintiff incorporated the business as Maytag Aircraft Corporation. Until 1956 he owned all but 104 of its 5,698 shares. ITis reasons for incorporating the business were natural ones: the avoidance of personal liability in a hazardous business; the simplification of records ; the possibility of getting additional capital from the outside if be should obtain a certain contract with the United States Air Force.

When Maytag Aircraft Corporation was formed the plaintiff was still devoting all of his time to its activities. During the years 1951 to 1956 the plaintiff caused four other corporations to be formed. Their nature is described in finding 8. Their activities were exclusively in the field of aviation and aviation equipment. In the conduct of the business of the several corporations the plaintiff made the decisions and personally exercised overall direction over the enterprises.

In 1951 the plaintiff and Earl Waynick organized a Colorado corporation, May tag-Waynick Inc. for the purpose of manufacturing a honeycomb-like product with an aluminum skin to be used in constructing, overhauling and repairing airplane hulls, fuel tanks, wings, stabilizers and struts. The plaintiff owned two-thirds of the stock of the corporation, and loaned Waynick the money to buy his one-third of the stock. The plaintiff devoted about 30 percent of his time to this corporation. Waynick was president. Because of operating losses and disagreements between the plaintiff and Waynick, Waynick resigned in 1952 and the plaintiff became the sole owner of the corporation’s stock. Later in 1952 Philip C. Cole bought some of the stock from the plaintiff. The plaintiff advanced large amounts to the corporation, taking the corporation’s notes. The business failed and the notes became worthless in 1953 or 1954. The carryback provisions of section 122(b) (1) (B) of the Internal Revenue Code of 1939 permit the plaintiff’s 1953 and 1954 losses to be carried back to 1952, the tax year in question in this case.

The details of the activities of the plaintiff, and of the corporations which he caused to be formed, are given in our findings, and we do not repeat them here. They show, we think, that the plaintiff’s business was a myriad of activities, all directly connected with aviation, which could be carried on as relatively small business enterprises without involving outside capital in large amounts. The plaintiff, for reasons satisfactory to him, carried on these enterprises in corporate form. He was not involved in these corporations merely as an investor. He worked in them, made the important decisions in them, put up the money to enable them to operate. The plaintiff was a very busy man, and what he was busy at was the activities of these enterprises. They were all within the same general field, that of aviation. If he had carried on all these activities as an individual proprietor, as indeed he did carry on most of them for several years, he could without question have included the successes and failures of all the separate branches of his business in his computation of his income. Our conclusion is that these activities were his business, and that the bad debt which he seeks to deduct was a business bad debt.

The decisions in which this question has been considered are numerous, and each case involves its own peculiar facts. Treasury Regulations 118, applicable to the Internal Revenue Code of 1939, says, in section 39.23(h)-6 (a) and (b) entitled Non-business bad debts:

(a) * * * The question whether the debt is one the loss from the worthlessness of which is incurred in the taxpayer’s trade or business is a question of fact in each particular case. * * *
(b) The character of the debt for this purpose * * * is to be determined rather by the relation which the loss resulting from the debt’s becoming worthless bears to the trade or business of the taxpayer. If that relation is a proximate one in the conduct of the trade or business in which the taxpayer is engaged at the time the debt becomes worthless, the debt is not a non-business debt for the purposes of this section.

The court decisions are not very helpful, because of the differences in facts on which they are based. The Government quotes the dissenting opinion of Judge Disney in Smith v. Commissioner, 17 T.C. 135, 147-149, which dissenting opinion was concurred in by several other judges. The basis of that opinion was that the majority of the court had included within the “business bad debt” category a situation in which the bad debt had merely been acquired in a transaction “entered into for profit” and had thus blurred a distinction which Congress had quite emphatically drawn. The view of the dissenters prevailed in the Court of Appeals. Commissioner v. Smith, 203 F. 2d 310 (2d Cir.), cert. denied, 346 U.S. 816. Of course one is not engaged in a business simply because he has invested money in it for the purpose of making a profit, and if he lends money to it in an attempt to protect Ms investment, and loses tbe money, be bas not lost tbe money in the business in which he is engaged.

Tbe dissenters in tbe Tax Court, and tbe Court of Appeals, in tbe Smith case, supra, and tbe Government in tbe instant case, rely on Higgins v. Commissioner, 312 U.S. 212. In that case the taxpayer sought to deduct as “business” expenses the expenses incurred in caring for bis stocks and bonds. The Court said, at page 214:

Petitioner did not participate directly or indirectly in tbe management of the corporations in which be held stocks or bonds.

This case of a passive investor in the securities of enterprises which he had not formed and did not control or work in has no resemblance to that of the plaintiff. No one could say, in reason, that the plaintiff was not engaged in business. But he did nothing other than manage and work in his corporations. It would seem to follow that the management and work was the business in which he was engaged, since that was the only thing he did. It would be hard to imagine a loss more “proximate” to that business activity than the uncollectibility of a loan made to it to promote its well-being.

What the Government urges, as we see it, is that if one embodies his business in the corporate forms, he may in fact spend his days in overalls working at a bench in his factory, but in law he will be regarded as engaged only in cashing dividend checks and clipping coupons. We see no reason to engage in such make-believe. If the lawmakers had intended to draw the line at the corporate form of business, they would have said so. If they had said anything susceptible of being interpreted to mean that, the Treasury in its regulations would have said so.

The Government complains that some of the corporate activities to which we have pointed as indications of the scope of the plaintiff’s aviation-connected activities occurred after 1954, and points out that the debt of Maytag-Waynick Inc. to the plaintiff became worthless not later than 1954. In determining the nature of the plaintiff’s relation to aviation in the years 1952,1953 and 1954, we think it is relevant to know, not only what the plaintiff was doing in that regard in those years, but what he was doing in that regard in the years immediately preceding and following those years. The more extended continuity is enlightening, and we see no reason to draw the curtain against parts of it. See Sinclair Refining Co. v. Jenkins Petroleum Process Co., 289 U.S. 689, 698.

The Government urges that the advances made by the plaintiff to Maytag-Waynick were not loans but were contributions to capital, and therefore the plaintiff’s loss of the money could not be considered a bad-debt loss. The advances took the form of loans, negotiable notes being issued for each advance of money. They were recorded on the corporation’s books and on the plaintiff’s personal books as loans. The debts to the plaintiff were never formally subordinated to those of other creditors, though in fact the plaintiff did not insist on a pro rata distribution with other creditors, because he was so closely identified with the corporation that he did not think it would be honorable to take a part of the small amount available to the creditors. The capitalization was not “thin”, the ratio of debt to equity being only slightly more than 2% to 1. The corporation was, in our opinion, indebted to the plaintiff.

The plaintiff is entitled to recover $22,406.06, with interest as provided by law.

It is so ordered.

Dureee, Judge; Laramore, Judge; and JoNES, Ghief Judge, concur.

Whitaker, Judge,

dissenting:

Plaintiff chose to carry on his activities through the in-strumentalities of several corporations. He created new persons to carry on his work for him. The particular person with whose business activities we are concerned in this case was not plaintiff, in the eyes of the law, but a different person, separate and distinct from plaintiff. However difficult it may be, rationally, to divorce one entity from the other, the law has created the fiction of two entities, separate one from the other.

Having availed himself of this fiction, plaintiff is entitled to its advantages, and is subject to all its disadvantages. Hence, the loan by plaintiff to the corporation was from one person to another person. But, can we say that the loan was made in the carrying on of plaintiff's business ? It was made to assist the corporation in carrying on its business, not plaintiff's. Since plaintiff elected not to carry on the business himself, but to have another person do it for him, then his loan to this person was a loan to and for the benefit of someone other than himself.

It was a loan to his agent, it is true, but it was one for which the agent was liable to plaintiff, because it was a loan in carrying on the agent’s business. Had it been an advance by plaintiff to his agent to carry on plaintiff’s business, the agent would not have been obligated to repay it.

Consequently, the loan could be taken into account as a bad debt incurred in plaintiff’s business only if we completely disregard the separate corporate entity. Plaintiff, by his own creation of the corporation, elected to have it treated as a separate entity. So treating it, its business was not plaintiff’s business.

This is not an easy case, but I think plaintiff must remain on the horns of the dilemma he himself has created.

FINDINGS OF FACT

The court, having considered the evidence, the report of Trial Commissioner Marion T. Bennett, and the briefs and argument of counsel, makes findings of fact as follows:

1. The plaintiffs were husband and wife from 1948 to October 1958 and were residents of the State of Colorado. They filed joint United States income tax returns for the calendar years 1952 and 1953 with the District Director of Internal Revenue, Denver, Colorado. Where the term plaintiff is hereafter used it refers to L. B. Maytag, Jr.

2. On March 12, 1956, plaintiffs filed a claim for refund in the amount of $22,406.06 for taxes paid for 1952, the same having been paid on or about March 15, 1953. Suit was filed in this court on July 26, 1957. On August 7, 1957, a formal notice of disallowance of the claim for refund was sent by registered mail by defendant to plaintiffs.

3. Plaintiff L. B. Maytag, Jr., born on August 5, 1926, holds commercial, instrument and multiengine pilot ratings. Since 1947 be has been engaged solely in businesses connected with flying and is now in the aviation business.

4. In August 1948 plaintiff purchased the assets and partnership business of Midwestern Air Service from Milo Moore and Warren Heckman. He continued this business as a sole proprietorship under the name of Midwestern Aircraft Company until January 1951. The activities of Maytag’s aviation business during this time included servicing; overhauling; repairing and maintaining aircraft, including the recovering of fuselages and wings; training pilots; charter passenger flying; gasoline and oil sales; storage and hangar rental; commercial refueling; selling parts, accessories and supplies; pilot and plane rentals; sales of aircraft; and contract refueling of military aircraft.

5. In January 1951, at the age of 24, plaintiff incorporated the sole proprietorship as a Colorado corporation under the name of Maytag Aircraft Corporation and the contract refueling in the United States is still carried on by that corporation as a part of Maytag’s aviation business. From this corporation’s formation until April 1956 plaintiff owned all but 104 of the 5,698 shares of outstanding capital stock therein. .

6. Plaintiff had several reasons for incorporating his business. He thought it would be helpful in furtherance of his plans to expand operations in the government contract area and would simplify the keeping of business records. He was, also, concerned about his exposure to personal liability which might arise from charter flying. He also contemplated seeking a contract with the United States Air Force which would have involved large capital investment, beyond his personal means, to rebuild and operate a government flight training center in Garden City, Kansas. Prior to the incorporation plaintiff devoted his full working time to the affairs of his Midwestern Aircraft Company.

7. Maytag Aircraft Corporation engaged in aviation activities similar to those conducted by Midwestern Aircraft Company but expanded the scope of its operations in the aircraft fueling field. At the beginning of the corporation’s life plaintiff devoted all of his business time to its affairs but, subsequently, became interested in other ventures which consumed part of Ms time. Maytag Aircraft Corporation invested funds in Sonic Research. Corporation formed to develop a noise suppressor for jet aircraft. Maytag Aircraft Corporation purchased and operated large vacuum-type sweepers to remove foreign matter from runways used by jet aircraft whose engines were damaged by such matter. The corporation also made contracts for operation of Air Force alert facilities in various bases and furnished various supplies to these bases. Maytag Aircraft Corporation also entered into a contract with Onmark Engineering Company of Van Nuys, California, for development of a turbo-propeller airplane. Plaintiff’s interest and activity in the aviation business is also illustrated by his purchase in April 1958 of the controlling interest in Frontier Airlines, a local service scheduled airline operating in 12 states. He is president of that airline.

8. During the years 1951-1956 plaintiff caused the formation of several separate corporations to engage in various phases of the aviation business. These corporations included the following:

(a) International Maytag Corporation which was engaged in the contract fueling of United States aircraft in West Germany. The name of this company was later changed to Universal Service Corporation, and Deutsche Maytag is a wholly owned subsidiary thereof.
(b) Overseas Equipment and Service Corporation, a Venezuelan corporation, which owned mobile fueling equipment leased to International Maytag for its operations in Germany. The evidence is that International Maytag was created for tax purposes and is not in existence today.
(c) Freehower Corporation which was formed to promote the sale of a silicon base preservative for aluminum aircraft skins. The project was abandoned when the Air Development Center at Wright Field did not approve the product and the corporation is now inactive.
(d) Maytag-Waynick, Inc., which is the subject of subsequent findings.

9. It is found that in the conduct of Ms aviation enterprises plaintiff assumed and was directly responsible for policy and the successful conduct of operations. He made the principal decisions, especially where money was involved. and Ms subordinates and associates, to-the extent shown by the evidence, looked upon him as the boss.

10. Earl Waynick, who had been a flight instructor for the Navy during the war, came to plaintiff’s attention in 1951. Plaintiff considered Waynick for various positions in his aviation enterprises. In September 1951 plaintiff, Earl Waynick, and Thayer Tutt organized a Colorado corporation, May tag-Waynick, Inc., for the purpose of manufacturing a cellular or honeycomb product made variously of plastics, paper and steel with an aluminum skin to be used in construction, overhauling and repairing airplane hulls, fuel tanks, wings, stabilizers and struts. As of October 3, 1951, Waynick owned 1,001 shares of the 3,003 shares of outstanding stock ($10 par value) of May tag-Waynick, Inc.; plaintiff owned 2,001 shares and Tutt owned 1 share. Waynick bought his stock with money loaned to him by plaintiff. Plaintiff’s investigation satisfied him that there was a ready market for this product and that the company would be given work immediately upon formation.

11. Plaintiff determined it would be wise to proceed in this venture under a new corporation because he actually did not know too much about Waynick or the product. Further, bookkeeping would be simplified by a separate corporate entity. It was originally estimated that $25,000 in capital would be required. It soon became apparent that this would be sufficient only for machinery and that additional capital would be necessary to provide and equip a building in which to operate and to cover payrolls and expenses required to qualify the product for acceptance by the Government and by aircraft companies. Plaintiff estimated, in the planning stage, that it would take another $50,000 to $75,000 to get into operation.

12. Plaintiff was secretary-treasurer of May tag-Way nick, Inc., and during the first year of operation devoted about 30 percent of his time to this business. Waynick was in charge of the detailed operations of the business but was required to consult with Maytag on all policy matters and expenditures of unbudgeted sums.

13. During the first year of operation ending September 30, 1952, much time was spent on research and development and not enough time on production and sales. The corporation lost approximately $130,000 during this first year of operation. The company employed from 50 to 60 people.

14. Maytag and Waynick were unable to agree on how the company should operate so Waynick was asked to resign in December 1952. On December 20, 1952, plaintiff took over Waynick’s shares in Maytag-Waynick, Inc., upon Waynick’s default on a note endorsed by plaintiff which Waynick had given to obtain funds to buy his 1,001 shares of stock. Plaintiff then became the sole stockholder except for one share held by Tutt. Fred Kester was employed to succeed Waynick.

15. Plaintiff believed that Maytag-Waynick, Inc., could make a profit if its product could be sold and production increased. Sample products were sent to hundreds of prospective buyers. Plaintiff testified that the product was a good one and that by December 1952 it was widely used in aircraft structures and allied products and several other companies were in the field with it. Plaintiff himself engaged from the beginning in the selling of the product of the corporation and spent considerable time in Canada contacting Canadair, Ltd., and at Wright Air Development Center in Dayton, Ohio, attempting to sell the product to the United States Air Force.

16. Plaintiff in 1952 interested Philip C. Cole, a lawyer of Colorado Springs, in investing in Maytag-Waynick, Inc. Cole bought $50,000 worth of the capital stock and loaned the company $20,000 and plaintiff increased his capital investment from $30,000 to $50,000 and loaned the company an additional $25,000. This was done as a step in refinancing the company. Funds were also borrowed from the First National Bank of Colorado Springs.

17. The evidence establishes that during the fiscal year ended September 30, 1952, Maytag-Waynick, Inc., made charges to 21 customers for merchandise in the total amount of $27,993.21 and during the fiscal year ended September 30, 1953, such charges totaled $240,480.87. These customers were largely well known aviation companies in the United States and Canada. The largest customer in the latter year was Canadair, Ltd., Montreal, Canada.

18. As a result of cessation of hostilities in Korea, Cana-dair, Ltd., canceled its contract in the summer of 1953. As a result of this development plaintiff concluded that it would be impossible for Maytag-Waynick, Inc., to make a profit. Upon consultation with Philip Cole it was agreed that the situation looked hopeless and the business should be shut down.

19. From October 1953 through 1956 Maytag-Waynick, Inc., was in the process of liquidation. It is stipulated that in its second year of operation, which ended September 30, 1953, the corporation lost approximately $225,000. The balance sheet as of that date, however, showed assets of $68,650.64 and liabilities amounting to $314,845.50.

20. In March 1952 Maytag-Waynick, Inc., borrowed $40,000 from the First National Bank of Colorado Springs on unsecured notes. This loan was repaid to the bank on April 3,1952.

From June 4, 1952 through August 18, 1952, Maytag-Waynick, Inc., borrowed sums stipulated to have totaled $100,000 from the same bank on notes endorsed by plaintiff. The same is recorded on the books of the company as notes payable in the total amount of $90,000. The notes were repaid in full by the end of October 1952.

From September 24 through September 30,1952, Maytag-Waynick, Inc., borrowed a total of $2,300 from the same bank on notes endorsed by plaintiff with the additional security of the pledge of accounts receivable from McDonnell Aircraft Company. These notes were repaid in full by October 9,1952.

21. On August 21, 1953, plaintiff was joined as a party defendant with Maytag-Waynick, Inc., in a suit in the United States District Court for Colorado, Civil Action 4443. The plaintiffs in that action, Plastics Engineering Corporation and E. E. Hardesty, alleged that L. B. Maytag, Jr., was the “alter ego” of defendant Maytag-Waynick, Inc., and sought $15,000 plus certain alleged back commissions in breach of contract. The lawsuit was settled in December 1954 by the payment of $8,000 by Maytag-Waynick, Inc., to plaintiffs in that action.

22. In settlement of the Canadair, Ltd., contract, Maytag-Waynick, Inc., received a net payment of approximately $20,000 in 1954.

23. Plaintiff advanced to Maytag-Waynick, Inc., a total of $205,000 between October 9, 1951 and October 9, 1952, the same being evidenced by promissory notes executed by the corporation to plaintiff and recorded in the books of Maytag-Waynick, Inc., as notes payable. The loans were listed as notes receivable on plaintiff’s personal financial records. They were unsecured. Plaintiff on October 9, 1952, received $2,873.91 as interest on $180,000 which he had advanced to Maytag-Waynick, Inc., prior to that date-This is recorded in his personal book of account. On October 9, 1952, he advanced an additional $25,000 referred to in finding 16.

24. Between December 19,1952 and October 27,1953, Maytag-Waynick, Inc., also borrowed substantial sums of money from the First National Bank of Colorado Springs on a series of 48 notes. A trust, of which the bank was trustee and Philip C. Cole was grantor, purchased these notes from the bank without recourse. These notes were recorded as notes payable on the books of the corporation. When the operations of the corporation terminated, the total debt on these notes to the Cole trust was $58,800.

25. All interest accrued to October 9, 1952, on the loans by plaintiff to Maytag-Waynick, Inc., has been paid but no payments have been made on interest accruing since that date. The liability for interest on this indebtedness was accrued on the books of Maytag-Waynick, Inc., until September 30, 1953, at which time the maintenance of all books of account, except the check book, was discontinued. Plaintiff had expected that interest would be paid on his loans to Maytag-Waynick and that the principal thereof would be repaid. He did not regard the advances he made to this company as contributions to its capital. It is true, however, that plaintiff made no demand for repayment of his unsecured loans to Maytag-Waynick, Inc. He knew the company did not have funds with which to make repayment and he desired to do what he could to keep the company in operation. Further, he did not seek a priority payment or even a pro rata distribution equal with other creditors upon the liquidation of the company because it was personally unacceptable to plaintiff to leave some company creditors unpaid while accepting such a settlement for himself.

26. William A. McDonald, a certified public accountant employed by plaintiff, made an investigation of the affairs of Maytag-Waynick, Inc., for the year 1953 and came to the conclusion that it was insolvent. He wrote a letter to plaintiff’s personal accountant on December 31,1953, advising that should book value then be realized on the assets of the company plaintiff would have a loss of $159,900 of the $205,000 plaintiff had loaned to the company. He then suggested that plaintiff should write off a sufficient amount of his loan to Maytag-Waynick, Inc., to offset all income for the year 1953 after net income had been reduced by $1,000 in capital losses, which can be taken against ordinary income. As a result of this advice plaintiff formed the opinion that the debt was partially worthless and made a charge-off in the amount of $63,000 on his 1953 income tax return as a business bad debt. It could not be determined in 1953 whether plaintiff’s advances were entirely unrecoverable because the company was entitled to some contract cancellation payments from Canadair, Ltd., of an unresolved amount. There were also unresolved claims against Maytag-Waynick, Inc.

27. McDonald advised plaintiff for the year 1954 that his loans to Maytag-Waynick, Inc., were completely worthless except possibly for $5,000 and that plaintiff should further write off as a bad business debt the sum of $137,000. Plaintiff did so on his 1954 income tax return.

28. Plaintiff received $3,600 in cash in 1956 as a repayment on his advances to Maytag-Waynick, Inc., and that is all he ever received. McDonald advised plaintiff to charge off on his 1955 tax return as a business bad debt the remaining $1,400. Plaintiff did so.

29. The corporate books and books of account and records of Maytag-Waynick, Inc., were kept in accordance with usual corporate accounting practices. Plaintiff has maintained a separate set of double entry books of account for his personal financial records since 1947 and has employed an accountant to keep those books and act as a financial adviser. Plaintiff’s income tax returns for the years 1951 through 1956 were prepared on the cash receipts and disbursements basis.

30. After October 9, 1952, plaintiff made no more loans to Maytag-Waynick, Inc., but did advance considerable sums to the other corporations he controlled, most of said sums being borrowed by plaintiff from banks. In 1956 he made three small loans to individuals. But for the default of the Maytag-Waynick loan, plaintiff would have received more interest than he paid on borrowed money during the 5 years 1952-1956.

ULTIMATE FINDINGS

31. Plaintiff L. B. Maytag, Jr., was engaged in a comprehensive aviation business during the years 1947 through 1956 and engaged in organizing and promoting aviation enterprises. While he borrowed and loaned considerable sums of money during the years 1951 through 1956 he did not hold himself out as a dealer in loans. During the years 1951 and 1952 plaintiff advanced funds only to Maytag-Waynick, Inc., and the Maytag Aircraft Company. He was the majority stockholder in both corporations during 1951-1952. These two companies and plaintiff regarded these advances as unsecured demand loans and so treated them on their books. The sums involved in this suit consist of loans by plaintiff to Maytag-Waynick, Inc., made during the period October 9, 1951 to October 9, 1952, the same totaling $205,000 and of which only $8,600 has been repaid.

32. The amount of plaintiff’s loss was $201,400. It arose in 1953 and 1954 and gives rise to a net operating loss carry-back to the year 1952 in an amount sufficient to eliminate all taxable income for that year, and plaintiff is entitled to a refund of income taxes assessed and paid by him for 1952 in the amount of $22,406.06 with interest.

CONCLUSION OF LAW

Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that plaintiffs are entitled to recover and it is therefore adjudged and ordered that they recover of and from the United States the sum of twenty-two thousand four hundred six dollars and six cents ($22,406.06), together with interest thereon as provided by law.