Court Opinion

ID: 4499533
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:16:29.90958+00
Date Added: 2024-06-11T15:04:06.974814
License: Public Domain

*882OPINION.
Littleton:
Upon consideration of the evidence submitted, we are of opinion that the stockholders of C. P. Lathrop & Co., Inc., owned or controlled all the stock of the Southern Sand & Gravel Co., Inc., during the calendar year 1920.
In the deficiency notice mailed to C. P. Lathrop & Co., Inc., the Commissioner gave no reason for reducing the allowance for officers’ salaries for 1920 from $50,500 to $35,500. Presumably, he thought that the total of the salaries paid by the corporation to its officers was unreasonable in amount. The Board is of the opinion from the evidence submitted in this proceeding that the Commissioner was not justified under the statute in reducing the deduction claimed by the corporation for compensation of its officers. The success of the business was due primarily to the services rendered by them; they devoted their entire time and efforts in the interest of the corporation. The entire responsibility of the management and the matter of profitableness of operations rested upon them.
The greater portion of the corporation income was due to their efforts. They were put to considerable personal expense in selling the corporation’s product in the face of keen competition, for which they were not reimbursed by the corporation. The officers had been with the business for a number of years, were experienced and capable men in this line, and were well acquainted with the persons and concerns, both large and small, having need for the material which the corporation was selling. All of this resulted in the corporation being one of the largest builders’ supplies concerns in its territory. There is no indication that the salaries pa-id constituted a distribution of profits in the guise of compensation; in fact the evidence is to the contrary. In view of these facts, the Board is of the opinion that the Commissioner was not justified in reducing the deduction claimed by the corporation for compensation of officers, and his action in this regard is reversed.
Judgment will he entered on 15 days’ notice, under Rule 50.