Case Name: Appeal of Stevens & Thompson Paper Co. (and Stevens & Thompson Co.)
Court: United States Board of Tax Appeals
Jurisdiction: United States
Decision Date: 1927-01-26
Citations: 5 B.T.A. 1213
Docket Number: Docket No. 3501
Parties: Appeal of Stevens & Thompson Paper Co. (and Stevens & Thompson Co.).
Judges: 
Reporter: Reports of the United States Board of Tax Appeals
Volume: 5
Pages: 1213–1215

Head Matter:
Appeal of Stevens & Thompson Paper Co. (and Stevens & Thompson Co.).
Docket No. 3501.
Promulgated January 26, 1927.
J. R. Little, Esq., for the petitioner.
M. N. Fisher, Esq., for the Commissioner.

Opinion:
OPINION.
Trussell:
The Commissioner's action in reducing taxpayers' surplus at the beginning of the several periods here under consideration by the amount of the prior year's income and profits taxes appears to have been made in accordance with existing regulations, and under the provision of section 1207 of the Revenue Act of 1926 such reduction of invested capital must be approved.
The computations of additional income taxes for the years 1913 to 1915, inclusive, as made by the Commissioner, do not appear to be questioned or to be in any way in issue in this proceeding. We must therefore conclude that the amounts of such taxes were due and owing to the United States prior to the beginning of the taxable year ended March 31, 1917, and, following the rule laid down in the Appeal of Harriet Cotton Mills, 5 B. T. A. 734, we must hold that they were for that and each subsequent period here under consideration properly eliminated from invested capital.
We have heretofore held in the Appeal of L. S. Ayers & Co., 1 B. T. A. 1135, that in the computation of invested capital for any period the amount of current earnings applicable to dividends paid during such period may not be reduced by a tentative tax computation. In the instant case it appears that the consolidated net income for the period ended March 31, 1917, was $206,710.36; that under the rule-of the Ayers case, supra, one-twelfth of that amount was current earnings applicable to the payment of dividends on April 30, 1916; that the total tax liability of these taxpayers for that period was found by the Commissioner to be $13,636.74. It is thus seen that the taxpayers' profits and income for the fiscal year were much more than sufficient to cover the amount of current earnings distributed in dividends on April 30, 1916, and the total tax liability for the full year. And, therefore, without discussing when income and profits taxes may be said to accrue, we are convinced that the rule in the Ayers case, supra, must govern in the instant case.
Order of redetermination will be made upon 15 days' notice, pwrsuant to Rule 50, and judgment entered m due course.