Court Opinion

ID: 4610909
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:47:54.28477+00
Date Added: 2024-06-11T07:54:09.003756
License: Public Domain

D. B. SCULLY SYRUP CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.D. B. Scully Syrup Co. v. CommissionerDocket No. 10005.United States Board of Tax Appeals10 B.T.A. 90; 1928 BTA LEXIS 4195; January 21, 1928, Promulgated *4195  1.  Invested Capital. - The respondent erred in reducing the amount of current earnings available for payment of dividends by a tentative tax.  2.  Invested Capital. - The inclusion in invested capital for the years 1920 and 1921 of a part of the income and profits taxes for the preceding years was in accordance with the respondent's regulations in force in respect of such taxable years and in accordance with section 1207 of the Revenue Act of 1926 "shall be considered as having been correctly made." G. A. Spencer, Esq., and Frank H. Bryan, Esq., for the petitioner, F. O. Graves, Esq., for the respondent.  GREEN *91  In this proceeding the petitioner seeks a redetermination of its income and profits taxes for the calendar years 1920 and 1921, for which the Commissioner determined deficiencies in the amounts of $3,793.74 and $614.73, respectively.  Two issues are presented by the pleadings.  First, whether the respondent erred in the computation of the petitioner's invested capital for each of the years in question in reducing current earnings available for the payment of a dividend by a tentative tax for the year in which the dividend*4196  was declared.  Second, whether the respondent erred in reducing the petitioner's invested capital by the amount of the income and profits tax payable within the year upon the income of the preceding taxable year.  FINDINGS OF FACT.  The petitioner is an Illinois corporation with its principal office at Chicago.  Its net income for the year 1920 was $159,094.83.  On April 17, 1920, it declared a dividend of $80,000.  In computing the amount available for distribution as dividends for the year 1920 the respondent reduced the amount of net income above set forth by the amount of a "tentative tax" of $55,000.  The balance, $104,094.73, was prorated and the respondent determined that at the date of the dividend there was available for distribution, as such, $30,432.06.  The respondent, in reducing the net income for 1920 by the amount of $55,000, reduced the amount of income available for dividends on April 17, 1920, by the amount of $16,079.27, which resulted in a reduction of invested capital of $11,378.50.  For the year 1921 the respondent determined that the income available for distribution was $63,937.66.  On March 16, 1921, the petitioner declared a dividend of $100,000. *4197  The respondent reduced the amount which he determined to be available for distribution by the amount of a "tentative tax" of $12,500, with the result that he found as available for distribution $51,437.66, which amount he prorated to the date of the dividend and found that on such date there was available for distribution $10,428.45.  His action in this regard effected a reduction of the amount available as of March 16, 1921, in the amount of $2,534.24, thereby reducing invested capital by the amount of $2,020.46.  The respondent determined the petitioner's tax liability for the calendar year 1919 to be $56,195.71 and prorated this amount over the year 1920, thereby reducing the invested capital for the year 1920 *92  by the amount of $23,683.57.  This was in accordance with the respondent's regulations in force in respect of such taxable year.  The respondent determined the petitioner's tax liability for the year 1920 to be $55,014.59 and prorated this amount over the year 1921, thereby reducing the petitioner's invested capital for the year 1921 by the amount of $23,249.31.  This was in accordance with the respondent's regulations in force in respect of such taxable year. *4198  OPINION.  GREEN: The first issue involves a question that has been decided adversely to the respondent many times.  ; ; ; . The second issue involves a question that has as often been decided adversely to the petitioner.  ; , and cases therein cited; . Judgment will be entered on 15 days' notice, under Rule 50.