Court Opinion

ID: 4618439
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:38:38.063759+00
Date Added: 2024-06-11T07:55:27.948424
License: Public Domain

ATLANTIC COAST LINE RAILROAD COMPANY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Atlantic C. L. R. Co. v. CommissionerDocket No. 35607.United States Board of Tax Appeals23 B.T.A. 888; 1931 BTA LEXIS 1799; June 29, 1931, Promulgated *1799  Amounts of unclaimed wages included in and allowed as a part of petitioner's operating expenses for the periods in which accrued and subsequently credited to profit and loss account held to constitute taxable income to petitioner when so credited.  Robert R. Faulkner, Esq., for petitioner.  L. A. Norman, Esq., for respondent.  GOODRICH *888  This proceeding involves the determination of petitioner's income-tax liability for the years 1922 and 1923.  All issues relating to the year 1922 were settled by agreement between the parties and there now remains for determination but one issue in the case for the year 1923, namely, whether amounts of wages payable to petitioner's employees, but unclaimed by them, which were charged to operating expenses during the years in which the wages accrued and were allowed as deductions by respondent during said periods, constitute taxable income to the petitioner when subsequently credited to its profit and loss account.  FINDINGS OF FACT.  The facts are stipulated and are as follows: 1.  Petitioner is a railroad corporation organized and existing under the laws of the State of Virginia and engaged in intra*1800  and interstate commerce.  It has been the consistent practice of petitioner to prepare pay rolls for wages due its employees from time books or other records.  The totals of such pay rolls are charged to operating expenses or other appropriate account and credited to a liability account, "Pay Rolls." The Pay Rolls Account is debited each month with the amounts paid either by check or cash.  2.  In making its Federal income-tax return for the calendar year 1920 petitioner claimed, and respondent allowed, as a deduction the total amounts of accrued expenses incurred during that year which were charged to expenses and credited to Pay Rolls Account.  In December, 1923, there were still outstanding checks aggregating $53,690.62 which had been issued on account of wages credited to Pay *889  Rolls Account, in the year 1920, and there was also outstanding the sum of $4,808.22, representing wages unclaimed for the year 1920, for which checks had not been issued, or an aggregate of $58,498.64.  This amount was in December, 1923, transferred to petitioner's Profit and Loss Account by credit to that account of $58,498.64 and a debit to "Pay Rolls" and "Unclaimed Wages" accounts in the*1801  respective amounts of $53,690.42 and $4,808.22.  3.  It has always been the consistent practice of petitioner to consider these items of unclaimed wages as definite liabilities and to pay the employees as and when claim is made therefor without consideration of any statutory period of limitation.  4.  Respondent, in addition to other items not here in dispute, has increased petitioner's taxable income for the calendar year 1923 in the amount of said $58,498.64 upon the ground that said amount constitutes taxable income to petitioner for 1923, the year in which transferred to Profit and Loss.  5.  When the appeal herein was filed to deficiency determined by respondent for the calendar year 1922 was $47,359.06.  Subsequently, petitioner waived the restrictions of section 274(a) of the Revenue Act of 1926 and, on March 29, 1928, after receipt of notice and demand, paid against said deficiency the amount of $44,490.69, together with interest thereon in the amount of $12,328.49, or a total of $56,819.18.  It is now stipulated by the parties hereto that the correct deficiency is $42,431.05, resulting in an overpayment of $2,630.22 for the year 1922.  6.  When the appeal herein was*1802  filed the deficiency determined by respondent for the calendar year 1923 was $46,836.08.  Subsequently, it was determined that the correct deficiency for that year, in accordance with respondent's method of computation, was $41,795.08.  Petitioner conceded that said deficiency of $41,795.08 was correctly determined except for the amount of $7,312.33, being the tax on the sum of $58,498.64, representing the unclaimed wages credited to profit and loss, the treatment of which is now at issue.  Subsequently, petitioner waived the restrictions of section 274(a) of the Revenue Act of 1926 and on March 29, 1928, on receipt of notice and demand, paid a portion of said deficiency, to wit, $37,346.71, with interest thereon of $8,108.05, leaving an unpaid balance of the corrected deficiency of $4,448.37.  OPINION.  GOODRICH: The issue here involved is clearly controlled by our prior decisions in the cases of ; affd., ; and ; affirmed by the Court of Appeals, District of Columbia, May 4, 1931.  We hold *890  therefore*1803  that respondent was not in error in including in petitioner's taxable income for the year 1923 the sum of $58,498.64, representing unclaimed wages credited in that year to petitioner's profit and loss account and previously allowed as a part of its operating expenses during the years in which said wage claims accrued.  We find the correct deficiency for the year 1923 to be $41,795.08, of which the unpaid balance is $4,448.37. In accordance with the stipulation entered into between the parties herein we find that on March 29, 1928, petitioner overpaid its income-tax liability for the year 1922 in the amount of $2,630.33, consisting of tax in the amount of $2,059.64, and interest thereon in the amount of $570.69.  Judgment will be entered in accordance herewith.