The Washington times., 1934-05-09
DECISION OF DISTRICT APPEALS COURT

~ VIZ ~OON
the credit balances as between the
several taxpayers varied in marked
degree. Each of them drew against
the corporation by check or by
order for such amount of his bal
ance as he wished to withdraw,
just as he would if he were deal
ing with bank. When the cor
poration paid out anything on &C
count of any of the taxpayers, it
charged it to his individual &C.
count.
In 1917 the taxpayers severally
had with the corporation credit
balances aggregating proxi-
mately $4,O00,0O0. They agreed
with one another that they would
invest this fund in Government
securities, and that the bonds pur-
chased by any one o. them should
be held for the account of all in
proportion to each ones stock
holdings in the corporation. On
their order the corporation issued
checks in excess of 100000 for
the purchase of Liberty Loan
bonds and Oklahoma City water
works bonds. The bonds so pur-
chased were allotted to the four
taxpayers in the proportion of
their StockholdingS in the corpora
tion. A charge was made against
the account of each taxpayer for
the amount of bonds thus &C.
quired by him individually. Each
of the taxpayers had sufficient
funds on hand to his credit with
the corporation to pay for the
purchase of the bonds. Thereafter
and until the sale of the bonds in
December, 1921, each taxpayer re-
ceived and used the interest from
the bonds allotted to him individ-
ually. After the purchase of the
bonds, the taxpayers at the end of
each calendar year, beginning De-
cember 81, 1917, and continuing
to December 81, 1920, transferred
the bonds to the corporation, and
the corporation credited the sew
eral taxpayers personal accounts
with their respective proportion
ate share of the amount of the
original purchase price of the
bonds. On the End day of Janu-
ary, 1918, and thereafter each
year until and including the End
day of January, 1921, the bonds
were transferred back to the tax
payers in the same proportionate
amounts as when transferred on
the preceding December 81, and
debit was made against each tax
payer in the amount of the pre-
vious credit. The transaction in
each year was confined to book
keeping entries.
The Board of Tax Appeals, in
it's opinion, referred to these
transactions between the corpora
ton and the taxpayers as wash
transactions" for the purpose of
avoiding Oklahoma ad valorem
taxes and never affected the title
of the property. The assertion
was partially admitted by coun-
sci.
On December IS, 1921, the four
taxpayers again transferred the
bonds to the corporation and
were given credit on the books
for the then market value and
the money so placed to their
credit was used as the occasion
demanded. The corporation con-
tinued to own and control the
bonds thereafter until, in 1928,
it sold them for it's own account.
The price at that time was less
than the price paid when the
bonds were originally purchased.
Both the commissioner and the
Board Of Tax Appeals disallowed
the taxpayers claim for loss. In
its first decision the board said:
"The transactions here involved
were between close corporation
and its only stockholders who
were in absolute control of all its
affalrS and acts. In these Circum-
stances it is apparent that none
Of the transfers can be regarded
as transactions at arms length
between a seller and a willing
buyer"
Later the board, in a memo
randum, based its decision on the
theory that the petitioners had
failed to show that they had
paid for the bonds or that they
held title to them at the time of
the sale to the corporation.
The appeals court expressed its
reluctance to weigh the evidence
or substitute it's opinion for that
of the board where the evidence
is conflicting, but asserted it's
duty to hold to its responsibility
in the face of stipulated facts.
DH,S u ~