Court Opinion

ID: 4614057
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:54:48.462976+00
Date Added: 2024-06-11T07:54:43.125619
License: Public Domain

FRED L. SMITH, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Smith v. CommissionerDocket No. 25519.United States Board of Tax Appeals20 B.T.A. 901; 1930 BTA LEXIS 2011; September 19, 1930, Promulgated *2011  Petitioner is liable as transferee for the unpaid income tax of the taxpayer for the taxable period involved herein.  Eugene Meacham, Esq., for the respondent.  ARUNDELL*901  Petitioner's petition seeking a redetermination of his liability as a transferee for unpaid income tax of the Interurban Motor Co. for the six-month period ended June 30, 1922, in the amount of $4,709.74, alleges that the respondent erred in: (a) Refusing to allow a value of $38,000 on franchises acquired for stock as part of the cost of assets sold; (b) determining that on September 1, 1921, additional capital stock in the amount of $38,000 was issued to stockholders and a "Franchise Account" set up on its books for the same amount; (c) proposing to assess against petitioner all of the unpaid income tax of the taxpayer, plus any penalty and accrued interest, and (d) determining that the unpaid income tax assessed against the taxpayer is for the six-month period ended June 30, 1922.  There was no appearance on behalf of the petitioner.  *902  FINDINGS OF FACT.  The petitioner, a resident of Glendale, Calif., on June 30, 1922, was the sole stockholder of the Interurban*2012  Motor Co., a Washington corporation, which, until its dissolution, pursuant to an order signed by the Superior Court of the State of Washington for Pierce County on August 29, 1922, was engaged in the business of operating bus lines.  At the time of the organization of the Interurban Motor Co. it acquired two franchises and a certain valuable contract covering the interchange of passengers and terminal rights with the Pacific Northwest Traction Co. and the Puget Sound International Railway & Power Co.  The franchises acquired gave the Interurban Motor Co. a monopoly over the routes they covered.  In 1922, prior to June 30, the Interurban Motor Co. sold all of its assets to the Pacific Northwest Traction Co. as of March 15, 1922, and out of the proceeds of the sale, on June 30, 1922, it distributed to the petitioner the sum of $85,845.60.  At the time the petitioner received the distribution the books of the Interurban Motor Co. disclosed that it had no indebtedness.  The Interurban Motor Co. filed its income-tax return for the six-month period ended June 30, 1922, on August 15, 1922.  In his determination of the tax liability of the Interurban Motor Co. for such period the respondent*2013  held that the franchises acquired by the corporation at the time of its organization had no actual cash value as of June 8, 1921, the date on which they are alleged to have been paid in for stock, and, accordingly, disallowed the amount as a part of the cost of the assets sold to the Pacific Northwest Traction Co.  The amount of income tax found to be due from the Interurban Motor Co. under the return, to wit, $4,709.74, was assessed against the corporation on the February, 1926, assessment list.  OPINION.  ARUNDELL: Petitioner alleges that at the time of the distribution of the liquidating dividend he was the "sole transferee of the assets of the corporation in name only," the stock held by other stockholders of the corporation having been previously transferred to him in order to facilitate the closing of the sale of the taxpayer's assets.  The record in this cause discloses that at such time petitioner owned all of the transferor's capital stock, and as such stockholder received a liquidating dividend many times in excess of the unpaid income tax of the taxpayer.  As a transferee of the assets of the Interurban Motor Co. he is liable for any unpaid income tax of the transferor*2014 *903  for the period in controversy to the extent of the amount received in liquidation.  , . The other issues raised by the petitioner must also be decided in favor of the respondent in the absence of evidence showing error was committed.  Decision will be entered for the respondent.