Court Opinion

ID: 4594401
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:12:53.918109+00
Date Added: 2024-06-11T07:51:14.719686
License: Public Domain

LANDERS BROTHERS CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Landers Bros. Co. v. CommissionerDocket No. 28393.United States Board of Tax Appeals21 B.T.A. 596; 1930 BTA LEXIS 1829; December 9, 1930, Promulgated *1829 Frank L. Mulholland, Esq., for the petitioner.  W. R. Lansford, Esq., for the respondent.  MARQUETTE *596  This proceeding was heard on April 24, 1929, and findings of fact and opinion thereon were promulgated on October 25, 1929, and are published in . On November 18, 1929, petitioner filed a petition for a rehearing on the ground that the official transcript of the proceeding erroneously stated "that on December 31, 1921, The Landers Brothers Company credited The Toledo Auto Fabrics Company on the books of The Landers Brothers Company with $127,978.25," whereas said transcript should show "that on December 31, 1921, The Toledo Auto Fabrics Company charged The *597 Landers Brothers Company on the books of The Toledo Auto Fabrics Company with $127,978.25, and that no part of said sum was credited to The Toledo Auto Fabrics Company on the books of The Landers Brothers Company prior to February 18, 1922." A rehearing was granted for the purpose of taking additional testimony in regard to the alleged error in the official transcript, and additional testimony was taken by deposition and submitted to the Board.  Said deposition*1830  contained testimony pertaining to matters other than the matter to which the rehearing was limited, and upon motion of the respondent said testimony, in so far as it related to matters other than the matter to which the rehearing was limited, was suppressed.  From the record as it now stands we make the following amended findings of fact.  FINDINGS OF FACT.  The petitioner is a duly organized corporation, located in Toledo, Ohio.  Its business is that of a jobber in rubberized cotton fabrics.  The Toledo Auto Fabrics Co. was a manufacturer of such fabrics.  Prior to and during the taxable year the petitioner was the selling outlet for about 75 per cent of the product of the Auto Fabrics Co.  The two companies occupied the same premises and their books were kept by the same bookkeeper.  R. S. Landers was the president and also the majority stockholder of both companies.  During 1921, because of rapidly falling prices, the petitioner's customers urgently demanded cancellation of their contracts for purchase of goods from the petitioner.  In most instances these demands were granted, as a matter of business policy.  In other cases the customers were required to make good their*1831  contracts and the petitioner collected from them $17,255.16 in 1922.  The petitioner tried to secure releases from its commitments to the Auto Fabrics Co., but was unsuccessful.  An agreement was finally made by and between the officers of the petitioner and the Auto Fabrics Co., for payment by the petitioner to the Auto Fabrics Co. of the difference between the then market price and the contract price.  On December 31, 1921, pursuant to this arrangement the Toledo Auto Fabrics Co. charged the petitioner with $127,978.25, which represented the difference between the contract price and the market price of the undelivered merchandise.  This amount was to be paid by the petitioner quarterly in four installments of $31,994.56 each.  During the year 1922 the petitioner issued to the Auto Fabrics Co. three credit memoranda aggregating $95,983.68.  In its income-tax return for the year 1922 the petitioner claimed as a deductible loss $78,255.16, which represented the difference *598  between its credit memoranda of $90,983.68 as above set forth, and the amount it collected from its customers upon their contracts.  The respondent disallowed this deduction and asserted a deficiency*1832  in tax amounting to $9,619.15, and also asserted a 50 per cent fraud penalty thereon amounting to $4,809.58.  The petitioner's return of income for 1922 was not false and fraudulent with intent to evade payment of tax.  OPINION.  MARQUETTE: We have carefully considered the record in this case, including the additional testimony taken pursuant to the order granting the rehearing on account of certain alleged errors in the transcript of the original hearing.  We find from the additional testimony that on December 31, 1921, the Toledo Auto Fabrics Co. charged the petitioner with $127,978.25 instead of the Toledo Auto Fabrics Co. being credited on the books of the petitioner with $127,978.25, as stated in the original official transcript.  However, in our opinion, the record as corrected does not change the material aspects of the case, and we see no grounds for reaching any conclusion other than that expressed in our opinion of October 25, 1929.  Therefore, pursuant to that opinion, Decision will be entered under Rule 50.