Court Opinion

ID: 4605832
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:37:13.10877+00
Date Added: 2024-06-11T07:53:16.125569
License: Public Domain

APPEAL OF MARCHETTI ROMA CAFE CO.Marchetti Roma Cafe Co. v. CommissionerDocket No. 1446.United States Board of Tax Appeals2 B.T.A. 529; 1925 BTA LEXIS 2378; September 8, 1925, Decided Submitted July 9, 1925.  *2378 Homer H. Tooley, C.P.A., for the taxpayer.  Ward Loveless, Esq., for the Commissioner.  *529  Before GRAUPNER, TRAMMELL, and PHILLIPS.  The taxpayer appeals from the determination of a deficiency of $4,812.58 in income and profits taxes for the calendar year 1921.  The greater part of the deficiency arises from the action of the Commissioner in determining that the taxpayer realized a profit of $18,027.91 on the sale of capital assets and adding that amount to income.  The other adjustments made by the Commissioner are not disputed.  The taxpayer alleges that in determining that a profit was realized on the sale of assets the Commissioner erred in reducing the cost of the assets by the amount of depreciation sustained and in including *530  as the equivalent of cash the notes in the amount of $40,000 received as a part of the sale price.  FINDINGS OF FACT.  1.  During 1921 the taxpayer was a California corporation with its principal place of business at Los Angeles.  2.  Subsequent to its organization in November, 1919, the taxpayer purchased certain assets, such as general equipment, furniture and fixtures, linen, dishes, utensils, and silverware, *2379  at a cost of $65,802.01.  These assets were used by the taxpayer in the cafe operated by it, and during the years 1919, 1920, and 1921 it claimed depreciation in amounts totaling $24,726.10, of which the Commissioner allowed as deductions from income for those years amounts aggregating $20,769.32.  The taxpayer makes no objection to the disallowance by the Commissioner of the difference between the depreciation claimed and that allowed.  3.  On December 3, 1921, the taxpayer sold its assets to the Winter Garden, a California corporation, for $65,110.60, upon which amount commissions of $2,050 were paid, leaving $63,060.60 as the net proceeds of the sale.  4.  The difference between the depreciated cost of the assets, $45,032.69, and the net sales price, $63,060.60, or $18,027.91, was treated as income by the Commissioner.  5.  The sales price of $65,110.60 was paid as follows: Cash$25,110.60Note20,000.00Note20,000.00The notes were secured by a chattel mortgage on the assets sold.  They were payable in monthly installments of $750 each and bore interest at the rate of 7 per cent.  6.  The corporation was dissolved shortly after the sale of its assets, *2380  and two of its stockholders each received as a portion of the corporate assets one of the notes given by the purchaser.  In July 1922, one of the stockholders attempted to secure a loan of $10,000 from the Bank of Italy, and offered the $20,000 note which he held as security.  The bank refused to make the loan.  No other evidence of the value of the notes when received was offered.  DECISION.  The determination of the Commissioner is approved.  , and . ARUNDELL not participating.