Court Opinion

ID: 4611272
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:48:38.416307+00
Date Added: 2024-06-11T07:54:13.393885
License: Public Domain

LYMAN-HAWKINS LUMBER CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Lyman-Hawkins Lumber Co. v. CommissionerDocket Nos. 15706, 15707.United States Board of Tax Appeals16 B.T.A. 46; 1929 BTA LEXIS 2654; April 17, 1929, Promulgated *2654  The evidence herein fails to show that the petitioner is entitled to have its taxes computed under the provisions of section 328 of the Revenue Act of 1918.  Arthur N. Presmont, Esq., and J. E. O. Feller, C.P.A., for the petitioner.  P. A. Bayer, Esq., for the respondent.  MARQUETTE *46  This proceeding is for the redetermination of deficiencies in income and profits-taxes asserted by the respondent in the amounts of $6,915.20 for the period February 1, 1919, to December 31, 1919, and $3,024.21 for the calendar year 1920.  The only error alleged by the petitioner is that the respondent failed and refused to compute the petitioner's profits taxes under section 328 of the Revenue Act of 1918.  *47  FINDINGS OF FACT.  The petitioner is a corporation organized under the laws of Ohio in 1908 with a capital stock of $50,000.  It was formed by five individuals - Jacob Abenshine, H. E. Lyman, Lucius Lyman, A. W. Hawkins, and C. W. Hawkins, to take over the business of the Lyman Lumber Co., which was an Ohio corporation with a capital stock of $10,000, engaged in the lumber business at Akron, Ohio, and of which H. E. Lyman and Lucius Lyman*2655  were substantial stockholders.  Abenshine and the two Hawkinses had no interest in that company.  On March 31, 1908, the petitioner's board of directors adopted the following resolution: * * * Whereas it is deemed advisable to purchase from the Lyman Lumber Company its stock of lumber, chattels, leases and leasehold interests and pay therefor stock of this company and money.  Now, therefore, be it resolved that we, the directors of this corporation, make and submit to The Lyman Lumber Company the following proposition and offer, to-wit: To the LYMAN LUMBER COMPANY, Akron, Ohio.GENTLEMEN: The undersigned corporation hereby offers and agrees to purchase from you, your lease and leasehold interest in the eleven year lease which was executed to you by the Brewster Coal Company March 23, 1908, also the ten year lease which was executed to you by Mrs. Catherine Steimel March 19, 1908, for certain land situated on the corner of Chestman and South High Street, and also all right, title and interest which you have to and in any and all buildings and fixtures now located on said lands above referred to and all stock of lumber and all other goods, chattels and property including*2656  office fixtures, furnishings and all other tangible things of whatever kind and nature as per invoice of said goods made March 31, 1908, and reference to which is hereby made and now owned by you and located on said lands and we hereby agree to pay therefor the sum of $21,402.45 payable in cash and in shares of paid up capital stock in this company, upon the acceptance of this offer and the execution to this corporation of a good and sufficient assignment transfer and sale of said property if made within 15 days from this date.  (Signed) THE LYMAN HAWKINS LUMBER CO. By: A. W. HAWKINS, President.and be it resolved that said offer be and is hereby made subject to the action thereon by and of the stockholders of this corporation, and the president and secretary of this company be and are hereby authorized and instructed to execute the foregoing agreement upon the adoption of the same by the stockholders.  And that a meeting of the stockholders of this company be called for the purpose of taking into consideration the execution of said proposed agreement, to be held at the office of Boylan and Brouse on the 31st day of March at 2 o'clock P.M. and the secretary is hereby directed*2657  to give notice thereof to all the stockholders of this company according to law.  * * * *48  The petitioner thereafter acquired certain of the assets of the Lyman Lumber Co., paying therefor cash in the amount of $21,402.45.  The petitioner did not purchase the accounts of the Lyman Lumber Co., which continued to collect its accounts after the sale to the petitioner.  Of the money paid by the petitioner for assets of the Lyman Lumber Co., $15,000 was returned to the petitioner by H. E. Lyman and Lucius Lyman in payment for the petitioner's capital stock, in the amounts of $12,000 and $3,000, respectively.  OPINION.  MARQUETTE: The petitioner contends that in the transaction outlined in the findings of fact it acquired the good will of the Lyman Lumber Co. without specifically paying therefor; that the good will so acquired had a substantial value which is not reflected in the petitioner's invested capital, and that thereby an abnormality is created in invested capital which entitles the petitioner to have its profits taxes for the years 1919 and 1920 computed under section 328 of the Revenue Act of 1918.  The petitioner introduced evidence tending to show the net income*2658  of the Lyman Lumber Co. for several years prior to 1908, and the income of the petitioner for a number of years subsequent to the acquisition by it of the assets of the Lyman Lumber Co.  There is, however, no evidence before us showing the value of the assets of either the petitioner or the Lyman Lumber Co. in any of those years.  Therefore, assuming the statement of earnings to be correct, there is not sufficient evidence from which we can make a finding that the Lyman Lumber Co. had any good will when the petitioner acquired its assets.  Furthermore, it may be pointed out that the evidence before us clearly indicates that the acquisition of the assets of the Lyman Lumber Co. by the petitioner was a cash transaction and did not involve payment in stock.  On the record we must affirm the determination of respondent.  Judgment will be entered for the respondent.