Court Opinion

ID: 4613622
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:53:50.305731+00
Date Added: 2024-06-11T07:54:38.758406
License: Public Domain

CON P. CURRAN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Curran v. CommissionerDocket No. 14307.United States Board of Tax Appeals15 B.T.A. 960; 1929 BTA LEXIS 2754; March 20, 1929, Promulgated *2754  Evidence held to sustain respondent's determination that a payment by a corporation was a dividend.  Bernard J. Thole, Esq., and Fred L. Van Dolsen, Esq., for the petitioner.  R. H. Ritterbush, Esq., for the respondent.  SIEFKIN*960  This is a proceeding for the redetermination of deficiencies in income taxes for the years 1920 and 1921 in the amounts of $459.18 and $26,876.67, respectively.  The petitioner concedes the deficiency for 1920 and the only question in controversy remaining is whether an item of $76,500 paid to the petitioner by a corporation in 1921 was a dividend or payment for a building.  FINDINGS OF FACT.  The petitioner is a resident of Normandy, Mo.  Until 1920 he owned the entire common capital stock of the Con P. Curran Printing Co., a corporation, and, with his wife, owned the building occupied by the corporation's business.  Prior to 1920 the petitioner had borrowed from the corporation until in 1920 he owed the corporation $298,598.  The petitioner made a verbal agreement with his wife, that if she died before he did, he would divide his interest in the corporation and the building with their children.  She*2755  died in May 1920, and thereafter, in August, 1920, pursuant to the agreement the petitioner gave the children 49 per cent of the stock of the corporation and retained 51 per cent.  On October 9, 1920, the petitioner deeded the building to the corporation, the deed reciting a consideration of $100.  The building and ground originally cost the petitioner $261,000.  Later he made various additions.  Before the transfer of the property to the corporation the petitioner sought to have the corporation pay him $400,000 for the property.  Discussions were had with other officers of the corporation, who objected that the corporation could not make a capital expenditure of that amount and that it was not necessary that the corporation own the building.  The petitioner was insistent that he have some money to divide with his children and it was finally agreed that the corporation would pay and he would take $150,000 for the property.  The petitioner then executed and delivered the deed to the property, which was recorded October 13, 1920.  No payment was made to the petitioner on account of the *961  transfer of the property in 1920.  On January 15, 1921, at the regular annual meeting*2756  of the board of directors of the corporation, the following resolution was adopted: After the reading and discussion of the Annual Report, Mr. F. W. Corley addressed the chair and expressed the belief that in view of the transfer of the building to the Company, the declaration of a dividend was justified, and that the amount of $150,000 if decided upon as the amount of the dividend, be credited on the books of the company, to the holders of the Common Stock, on the basis of their holdings.  The amount so credited to the stockholders of record, to earn interest at the rate of 6 1/2% per annum, payable quarterly, and that this dividend, so credited on the books of the Company to said Common Stockholders, cannot be withdrawn, either in part or in whole, except on order of the management.  Mr. F. W. Corley then made the motion that a dividend be declared of $150,000.00 and the amount prorated to the holders of the Common Stock, on the basis of their holdings, and that the prorated amounts be credited on the books of the Company, said amounts to bear interest at the rate of 6 1/2% per annum, and that these credits can only be withdrawn on order of the management.  This motion was*2757  seconded by Mr. John F. Curran, and upon a vote being taken was found to have carried unanimously.  The secretary was instructed to notify the stockholders of this credit, by letter, accordingly.  The petitioner's share of the $150,000 dividend was $76,500, which amount was credited against his indebtedness to the corporation.  The petitioner did not include the amount of $76,500 as income in his return for 1921.  The respondent, in determining the deficiency for that year, treated the amount as a dividend received in 1921.  At the time of the resolution of January 15, 1921, the corporation had earnings accumulated in its surplus account in excess of the amount of the dividend.  On its return for 1921 the corporation reported $150,000 as a cash dividend.  OPINION.  SIEFKIN: The only issue remaining in this proceeding is one of fact.  The corporate action taken indicates that a dividend was declared in 1921 and that the petitioner's portion of that dividend, $76,500, was credited to him by application against indebtedness.  All of the documentary evidence points to the amount being a dividend and the respondent has so taxed it to the petitioner.  The petitioner contends*2758  here, however, that his purpose and that of the corporation, which he controlled, was not to receive or declare a dividend, but was to receive or pay for certain real estate transferred to the corporation by the petitioner in 1920.  We are convinced from all the evidence that the petitioner intended that the corporation should pay $150,000 for the property.  We also *962  believe that the petitioner was satisfied with the action as taken by the corporation in declaring and paying the dividend.  The evidence does not convince us that the steps taken by the corporation, according to the documentary proof, misstated the facts.  Except for the difference in the tax imposed, this very dispute, it did not matter to the petitioner how he was paid.  Either way his indebtedness to the corporation was reduced by $76,500 - and that was all he expected to get, and the testimony that he intended to sell the property (for a price out of which he would get $76,500) does not show that what the corporation did in 1921 was not the thing it purported to be.  We are unable to say that the respondent's action was erroneous.  Reviewed by the Board.  Judgment will be entered for the respondent.*2759