Court Opinion

ID: 5382828
Source: CourtListenerOpinion
Date Created: 2022-01-08 09:09:44.573678+00
Date Added: 2024-06-11T08:30:10.066117
License: Public Domain

Hill, P. J. (concurring).
Petitioner, the Pierce-Arrow Motor Car Company, Was incorporated and there was a merger with the Pierce-Arrow Motor Car & Truck Corporation in December, 1916. Petitioner, 1695 Elmwood Avenue Corporation, was organized in 1938 and has acquired the assets of the Motor Car Company, including tax refund claims. The Motor Car Company was incorporated in about the year 1935 under the name Which appears in the title. In this review under the Tax Law, a right to refunds against the State is urged as to three items.
Petitioners ask a refund of $89,118.40 in connection with the tax for 1917 which was based on the net income for the year 1916 computed at more than four million dollars. It included the earned income of petitioner after its incorporation on December 6, 1916, and the earned .income of the company with which it was merged which had been in business during the entire year. The taxpayer’s income for December was $285,902.29, and it asserts that a tax of 3% computed thereon is all that can be demanded. Chapter 292 of the Laws of 1918 added a section to article 9-A of the Tax Law (§ 214-a) providing that a corporation with which another had been merged was required to report the income of both, and chapter 628 of the Laws of 1919 purported to make retroactive the tax imposed, in 1917 under article 9-A. Petitioners challenge the constitutionality of the 1919 amendment and assert that a tax may not be levied under a retroactive statute. Authorities cited seem to sustain the levy.
*293Petitioner Motor Car Company in 1919 set np on its books $126,142 as an inventory loss in the market value of certain tool steel. The Commissioner of Internal Revenue disallowed $68,386 of the claimed loss. The State, following the Federal taxing authority, made a like deduction. Petitioners seek a refund of the 4%% tax paid on that amount, or the sum of $3,077.37. The Tax Commission decided that the Federal determination was not shown to be erroneous and that under People ex rel. Conway Co. v. Lynch. (258 N. Y. 245) the State was permitted to figure gross income in the manner authorized by the United States statutes, rules and regulations.
In connection with the 1921 tax, petitioners assert that $983,151 should be deducted from the net income, and that 4%% thereon, or $44,241.79 should be refunded. It is unquestioned that the Motor Car Company suffered heavy losses in 1919 and 1920 in connection with the introduction of a new model. The loss is made up of four items; $747,868, being one half of the amount which it claims it expended and lost. This amount appeared on the books of the company as the loss in 1920 and would be reflected in the 1921 tax. This item was not allowed by the Government. There was also a claimed loss on inventory of $135,283, partly a reserve set up to take care of refunds on account of defective engines in the new model and 'the loss incurred during November and December, 1920 ; a reserve of $50,000 to cover losses in connection with the return of automobiles which had already been sold, and a like amount, being $500 a car on one hundred cars still in stock. These items were the subject of litigation in the Federal courts, and were disallowed as deductions allowable in connection with the 1921 tax. The State follows the Federal rules, regulations, statutes and decisions.
The determination of the Tax Commission should be confirmed.
Brewster, Foster and Lawrence, JJ., concur with Heffernan, J.; Hill, P. J., concurs in a separate opinion.
Determination confirmed, with $50 costs and disbursements against petitioners. [See post, p. 867.]