Court Opinion

ID: 4597258
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:18:49.169636+00
Date Added: 2024-06-11T07:51:45.300037
License: Public Domain

RALSTON STEEL CAR CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Ralston Steel Car Co. v. CommissionerDocket Nos. 7640, 18158.United States Board of Tax Appeals15 B.T.A. 1416; 1929 BTA LEXIS 2673; April 12, 1929, Promulgated *2673  Value of patents determined.  E. C. Turner, Esq., and Paul Armitage, Esq., for the petitioner.  A. H. Fast, Esq., and H. D. Thomas, Esq., for the respondent.  SIEFKIN*1416  These are proceedings, duly consolidated for hearing and decision, for the redetermination of deficiencies in income and profits taxes for the years 1918 and 1920 in the respective sums of $128,837.77 and $50,518.39.  The issue is one of fact, i.e., the fair market value of certain patents exchanged in 1905 for stock for purposes of the computation of invested capital in the years in question, and for purposes of depreciation as to the year 1918.  FINDINGS OF FACT.  In June, 1905, on incorporation, the petitioner, the Ralston Steel Car Co., an Ohio corporation, issued $600,000 par value of its common capital stock to Joseph S. Ralston in exchange for four patents covering a class of metallic flush floor dump freight cars.  At the same time the petitioner assumed $250,000 bonds of the Rarig Manufacturing Co. in consideration of the conveyance of a plant site and factory and issued then or thereafter preferred stock of the par value of $307,000.  The patents assigned*2674  by Joseph S. Ralston to the petitioner in 1905 were issued between June 28, 1904, and July 11, 1905, except for , which was issued March 26, 1907, on the basis of 1 original, issued June 28, 1904.  At the beginning of the petitioner's business, it labored under the disadvantages of being inadequately financed and of being burdened with a factory which was obsolete and inadequate for efficient manufacture.  It had, however, many inquiries and orders for its product, the general service car covered by the Ralston patents, on which a *1417  considerable profit could be anticipated.  From the facts known in 1905, the actual cash value of the patents was at least $600,000, the par value of the common stock issued for them.  On March 3, 1917, the petitioner had outstanding capital stock of the par value of at least $4,000,000.  In determining the deficiencies asserted, the respondent eliminated from invested capital the sum of $600,000 in 1920, and $650,000 in 1918, as the value of the patents in question at the time paid in in 1905.  OPINION.  SIEFKIN: The voluminous evidence in these proceedings of well qualified witnesses leads us to the*2675  practical certainty that the so-called Ralston patents had an actual cash value of $600,000 at the time paid in to the petitioner.  Error is alleged in Docket No. 18158 as to the disallowance for the year 1918 of depreciation on the cost of the patents.  No such error is alleged in Docket No. 7640, relating to 1920.  We are unable to determine from the record that any amount was disallowed or that the deficiencies asserted are thereby affected.  On that question, therefore, we must hold against the petitioner.  Judgment will be entered under Rule 50.