Court Opinion

ID: 4632455
Source: CourtListenerOpinion
Date Created: 2020-11-21 03:11:50.977632+00
Date Added: 2024-06-11T07:59:11.592717
License: Public Domain

SPARK HOTEL CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Spark Hotel Co. v. CommissionerDocket No. 7761.United States Board of Tax Appeals5 B.T.A. 186; 1926 BTA LEXIS 2938; October 26, 1926, Decided *2938  The petitioner was not a personal service corporation within section 200 of the Revenue Act of 1918.  Arnold Markel, C.P.A., for the petitioner.  J. F. Greeney, Esq., and J. Arthur Adams, Esq., for the respondent.  MURDOCK *186  This appeal was submitted to the Board upon petition and answer, and a stipulation of the facts.  There was no oral hearing or argument, and no briefs were filed.  The taxes in controversy are income *187  and excess-profits taxes for the calendar year 1919 in the amount of $1,355.74.  The single question involved is whether the petitioner was, during the period in question, a personal service corporation, as defined in section 200 of the Revenue Act of 1918.  FINDINGS OF FACT.  The petitioner was incorporated in the State of New York on June 3, 1913.  Its principal office is at 182 St. Nicholas Avenue, New York, N.Y.  The authorized capital stock of the corporation, all of which is issued and outstanding, consists of 50 shares of common stock each share having a par value of $100.  In 1919, Morris Spark owned one share and Annie Spark, his wife, owned the remaining 49 shares.  Annie Spark was president and*2939  Morris Spark was secretary and treasurer.  The directors were Annie Spark, Morris Spark and Jacob Spark.  The corporation operated two hotels: The Grampion Hotel, New York, N.Y., a seven-story brick building containing 100 rooms, open all year, rooms rented by the day, month or year on the European plan, without meals; the La Reine Hotel, at Bradley Beach, N.J., a four-story frame building containing 120 rooms, open from June 15 to September 15, rooms rented by the day, week or season on the American plan, including meals.  The former was operated on a leasehold, running for five years at an annual rental of $9,000, expiring in 1921.  The latter was operated on a leasehold running for three years at an annual rental of $9,000, expiring in 1920.  Additional rooms and cottages to take care of the overflow guests were rented at Bradley Beach, N.J., in 1919, for $2,608.50.  Morris Spark spent his entire time in personally supervising the rooms and desk service.  Annie Spark had charge of the dining room and kitchen, and spent all of her time in personally supervising the dining room and the purchase and preparation of all foods.  Employees of the company other than Morris Spark and*2940  Annie Spark were as follows: Grampion Hotel: 4 maids.  2 elevator men.  1 engineer.  La Reine Hotel: 20 waitresses.  10 kitchen help.  8 chamber-maids.  5 bell-boys and porters.  2 desk clerks.  The details of operations during the year 1919 were as follows: INCOME:Room and board$103,243.50Cigar stand income1,732.90Miscellaneous income from concessions952.18Total income105,928.58Total income$105,928.58EXPENSES:Salaries and wages$21,103.58Provisions25,233.00Restaurant622.69Cigar stand1,254.82Coal2,835.65Light1,669.85Laundry1,144.48Furnishings2,878.15Advertising52.50Postage54.69Stationery and printing322.19Freight and express227.62Miscellaneous supplies1,498.52Telephone724.60General expense1,337.32Rent20,608.50Insurance151.85Water281.67Officers' salaries12,000.00Repairs4,274.41Bad debts140.93Total expenses98,417.02Net taxable income as shown in deficiency letter7,511.56*188  The balance sheets at the beginning and end of 1919 were as follows: January 1, 1919.ASSETS:Cash$5,334.47Loans1,268.91Deposits819.78Due from guests61.48Furniture and fixtures2,500.00$9,984.64LIABILITIES:Accounts payable1,877.26Rent accrued1,875.00M. Spark1,623.535,375.79CAPITAL:Capital stock5,000.00Deficit391.154,608.85December 31, 1919.ASSETS:Cash$1,713.04Loans1,112.85Deposits819.78Furniture and fixtures2,500.00M. Spark9,754.3615,900.03LIABILITIES:Accounts payable$108.99Rent accrued1,875.00Salaries accrued1,771.40$3,755.39CAPITAL:Capital stock5,000.00Surplus7,144.6412,144.64*2941 *189  OPINION.  MURDOCK: If any corporation operating a hotel fulfills the requirements of a personal service corporation, as defined in section 200 of the Revenue Act of 1918, it is most exceptional, but certainly the present petitioner fails to fulfill those requirements.  ; ; . Judgment will be entered for the Commissioner.