Court Opinion

ID: 4619379
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:40:29.394893+00
Date Added: 2024-06-11T07:55:37.883608
License: Public Domain

APPEAL OF GEORGE E. CRANE CO., INC.George E. Crane Co. v. CommissionerDocket No. 142.United States Board of Tax Appeals2 B.T.A. 567; 1925 BTA LEXIS 2336; September 9, 1925, Decided Submitted June 9, 1925.  *2336 Ernest L. Riley, C.P.A., for the taxpayer.  Ward Loveless, Esq., for the Commissioner.  *567  Before GRAUPNER, TRAMMELL, and PHILLIPS.  The above-entitled appeal is from the determination of a deficiency in income and profits taxes for the calendar year 1918 in the amount of $1,965.55.  The deficiency results from the denial by the Commissioner of personal service classification to the taxpayer.  FINDINGS OF FACT.  1.  The taxpayer is a California corporation organized in 1905 and doing business in the City of Stockton.  2.  The taxpayer is engaged in the business of buying and selling real estate for clients, collecting rents, doing a general insurance brokerage business, acting as financial agent, and loaning money for clients.  3.  George E. Crane and W. E. Washington were the owners in equal shares of all of the capital stock of the taxpayer during the year 1918, excepting two shares which were held in the name of a bookkeeper of the taxpayer for the purpose of qualifying him as a director.  Crane and Washington devoted their full time to the business of the taxpayer and acted as managers and salesmen.  There were three employees of the taxpayer. *2337  The earnings were distributed equally between Crane and Washington at the end of each year.  4.  The balance sheet shows the following to be the assets, liabilities, and capital of the taxpayer as of December 31, 1917, and December 31, 1918: Dec. 31, 1917Dec. 31, 1918ASSETSCurrent:Cash on hand$87.51$20.04Cash in banks88,062.8218,379.16Accounts receivable (insurance premiums)1,296.775,291.07Notes receivable4,616.4638,698.40Notes receivable (W. A. Washington)5,000.0022,500.00Notes receivable (Geo. E. Crane)2,500.00Advances (Geo. E. Crane)8,153.72Advances (W. A. Washington)7,665.18Revenue Stamps15.232.64Inv. beans (taken in as commission)1,545.18Union Island Farm33,293.24Deposits (overdrawn)3,882.055,080.55Total137,799.26108,290.76Fixed assets:Furniture and fixtures$1,281.07$1,152.97Stocks11,477.8411,613.65Jones property344.41344.41Newell block279.89279.89Smith-Gould property539.53539.53Total13,922.7413.930.45Total assets151,722.00122,221.21LIABILITIES AND CAPITALCurrent liabilities:Suspense300.00Demand deposits and collections118,933.7972,421.21Notes payable27,000.00Notes payable (Geo. E. Crane)7,500.00Accounts payable (Geo, E. Crane)1,624.50Accounts payable (W. A. Washington)563.71Total128,922.0099,421.21Capital - capital stock 122,800.0022,800.00Total liabilities and capital151,722.00122,221.21*2338 *568  5.  In support of its contention that its principal income resulted from the personal service of the stockholders the taxpayer has tabulated its income for 1918, as follows: Amount.Percentage of income.Selling price of beans taken as commission over market value Dec. 31, 1917$247.171.04Commissions, attorneys' fees, etc11,702.1849.50Commission and profit, Brandt & Knomann deal9,793.1141.42Interest received$3,973.63Less interest paid2,695.381,278.255.41Dividends received621.502.63Total gross income23,642.21100.006.  During 1918 taxpayer received authorization from Brandt & Knomann to purchase for them a ranch known as the Nichol ranch, it being agreed that Brandt & Knomann would pay $175 per acre and that the taxpayer was to make its commission from the seller.  The taxpayer purchased the property for approximately $9,000 less than Brandt & Knomann had agreed to pay, representing its profit on the transaction.  It held title to the property for some time, until the tenants on it were dispossessed.  The transaction was financed by funds borrowed*2339  by the taxpayer.  DECISION.  The determination of the Commissioner is approved.  ARUNDELL not participating.  Footnotes1. Includes stock dividend of $2,100 par value. ↩