Court Opinion

ID: 4632233
Source: CourtListenerOpinion
Date Created: 2020-11-21 03:11:22.135811+00
Date Added: 2024-06-11T07:57:51.389194
License: Public Domain

APPEAL OF CULTIVATOR PUBLISHING CO.Cultivator Publishing Co. v. CommissionerDocket No. 1100.United States Board of Tax Appeals2 B.T.A. 516; 1925 BTA LEXIS 2370; September 8, 1925, Decided SubmittedJuly 14, 1925.  *2370 Dan J. Chapin, Esq., for the taxpayer.  John D. Foley, Esq., for the Commissioner.  *516  Before GRAUPNER, TRAMMELL, and PHILLIPS.  This appeal involves a deficiency in income and profits taxes for the calendar year 1920 and is based on the disallowance by the Commissioner of a deduction claimed as representing a salary payment to one of its officers in that year.  FINDINGS OF FACT.  1.  The taxpayer is a California corporation with its principal place of business at Los Angeles.  *517  2.  It was organized in 1908 with a capital stock of $40,000, divided into 800 shares of a par value of $50 each.  Frank H. Thomas and R. M. Teague each owned 399 shares, or all but 2 qualifying shares.  The business of the taxpayer was managed by Thomas, who in 1920 was president and general manager.  Teague gave little or no time to the business.  Thomas drew a salary of $200 per month until about 1912 when his salary was increased to $250 per month and about 1919 it was again increased to $300 per month.  3.  In April, 1920, Thomas sold his stock to employees of the taxpayer and withdrew from the business.  On April 21, 1920, the taxpayer paid Thomas $6,839.33, *2371  which was recorded in the taxpayer's ledger as a debit to the personal account of Thomas.  During 1920 and until the time of his retirement from the business the taxpayer paid Thomas a salary, which, added to the amount paid him on April 21, amounted to $8,229.06.  This entire amount was claimed as a deduction in the return filed for 1920 as representing compensation of officers.  The amount of $6,839.33 was disallowed by the Commissioner.  No satisfactory evidence was offered as to the purpose of such payment.  DECISION.  The determination of the Commissioner is approved.  ARUNDELL not participating.