Court Opinion

ID: 4629025
Source: CourtListenerOpinion
Date Created: 2020-11-21 03:04:35.170388+00
Date Added: 2024-06-11T07:57:18.172177
License: Public Domain

OVERBROOK NATIONAL BANK OF PHILADELPHIA, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Overbrook Nat'l Bank v. CommissionerDocket No. 32378.United States Board of Tax Appeals23 B.T.A. 1390; 1931 BTA LEXIS 1718; August 31, 1931, Promulgated *1718  Petitioner, not being the "taxpayer," within the meaning of section 206 of the Revenue Act of 1924, is not entitled to deduct from its income a net loss sustained by one of its predecessor corporations.  B. B. Hoar, Esq., for the petitioner.  O. J. Tall, Esq., for the respondent.  GOODRICH*1390  Respondent has determined a deficiency of $3,889.12 for the year 1924, of which there is in controversy the amount of $2,124.33.  Petitioner asserts that respondent erred in failing to deduct from its gross income for the year 1924 a net loss in the amount of $31,193.48 sustained during that year by the Fifty-Second Street Bank.  FINDINGS OF FACT.  Petitioner is a national bank, chartered under the statutes of the United States, and has its principal office at Philadelphia, Pa.  During the year 1923, and for some time prior thereto the Fifty-Second Street Bank and the Overbrook Bank of Philadelphia were separate and distinct corporations, each organized and existing under the laws of Pennsylvania and each engaged in the banking business in the city of Philadelphia.  Under date of October 10, 1923, the aforesaid banks entered into an agreement of*1719  merger or consolidation wherein it was provided, inter alia, that all the properties of every kind and nature, including franchises and all choses in action, of each of them should be deemed and taken as transferred to and invested in a new, or consolidated, company, which assumed all the debts and obligations of each of said banks.  The agreement referred to is in evidence, but to include it herein verbatim would unnecessarily extend this report and therefore it is incorporated herein by reference.  The merger of these banks, effective as between the parties on April 1, 1924, was thereafter consummated in accordance with the contract, and under the supervision of the State banking department.  On April 23, 1924, Letters Patent were issued by the Commonwealth to the consolidated bank, which was named Overbrook Bank of Philadelphia.  Thereafter application was made to charter the consolidated bank as a national bank and under date of September 2, 1924, the certificate of the Comptroller of the Currency was issued and the bank authorized to commence business in that status.  Between January 1, 1924, and March 31, 1924, the Fifty-Second Street Bank sustained a loss upon loans*1720  ascertained to be worthless *1391  and charged off during that period in the amount of $30,793.10 and during the same period sustained an operating loss in the amount of $4,685.51, subject to certain adjustments.  The parties agree that the total loss sustained by said bank during said period was $31,193.48, and that said loss is a "net loss" within the meaning of section 206 of the Revenue Act of 1924.  This loss, sustained by the Fifty-Second Street Bank as aforesaid, respondent has refused to permit petitioner to deduct from its gross income for the year 1924, and the denial of this deduction results in the tax deficiency in controversy.  OPINION.  GOODRICH: The whole issue here is whether, as a matter of law, a net loss may be deducted from income, not by the Fifty-Second Street Bank, by which it was sustained, but by this petitioner, a national bank formed by the merger of the Fifty-Second Street Bank with the Overbrook Bank and the subsequent charter under the Federal statutes of the consolidated corporation.  Petitioner urges that the consolidated bank was a continuation of the old constituent corporations and has the same right to deduct this loss as had the single*1721  bank before the merger.  It contends that, in substance, the new legal entity sustained the loss, because the merger proceedings were merely matters of from and the two banks continued to conduct their business after the merger precisely as before.  In short, it contends that the new corporation, although a distinct legal entity, is to all practical intents and purposes, a mere continuation of the old corporations, and, therefore, should be permitted to deduct from its income the net loss sustained by one of the constituent corporations.  This precise issue has heretofore been considered by this Board, its prevailing opinion being adverse to petitioner's contention.  See ; ; , rehearing, ; ; ; ; . Unless the principles established by these cases are overruled by higher authority, we must conform*1722  thereto and hold that petitioner is not the "taxpayer" within the meaning of section 206 of the Revenue Act of 1924, and, therefore, is not entitled to deduct from its income the net loss sustained by one of its predecessor corporations.  Judgment will be entered for the respondent.