Court Opinion

ID: 4595709
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:15:34.159482+00
Date Added: 2024-06-11T07:51:29.581827
License: Public Domain

TITLE GUARANTEE LOAN & TRUST CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Title Guarantee Loan & Trust Co. v. CommissionerDocket No. 18252.United States Board of Tax Appeals15 B.T.A. 1220; 1929 BTA LEXIS 2706; April 2, 1929, Promulgated *2706  The petitioner and the Real Estate Mortgage Co. were affiliated corporations during the taxable year.  E. J. Smyer, Esq., for the petitioner.  E. M. Meacham, Esq., for the respondent.  LITTLETON*1220  The Commissioner determined a deficiency in income and profits tax of $221.81 for the fiscal year ended September 30, 1922.  The question is whether the Commissioner correctly held the petitioner and the Real Estate Mortgage Co. to be affiliated corporations for the taxable year.  FINDINGS OF FACT.  Petitioner is an Alabama corporation, with principal office in Birmingham.  Its capital stock is $200,000 divided into 2,000 shares of the par value of $100 each.  It kept its books on the basis of a fiscal year ending September 30.  The Real Estate Mortgage Co. is also an Alabama corporation, with principal place of business in Birmingham.  Its capital stock is $8,000 divided into 800 shares of the par value of $10 each.  It kept its books on the calendar year basis.  *1221  Petitioner has never owned or controlled in its own right any of the stock of the Real Estate Mortgage Co., nor has the latter company ever owned or controlled in*2707  its own right any stock of the former.  The business carried on by the petitioner during the entire period since its organization has been making abstracts of title and insuring titles to land, acting as trustee, executor and administrator and other acts usually performed by a trust company.  The business of the Real Estate Mortgage Co. from its organization has been that of making loans on real estate secured by mortgages, borrowing money at low rates of interest, lending out same at higher rates and securing same by pledges of notes and mortgages.  The petitioner and the Real Estate Mortgage Co. have never made returns as affiliated corporations.  The business carried on by the two companies has been entirely separate and distinct.  No officer or director of petitioner from its organization through the year 1922 has ever been an officer or director of the Real Estate Mortgage Co., and the business of these companies has never been interlocking or in any way united, or the business of the one carired on in aid of the business of the other.  The directors of the petitioner during the fiscal year 1922, and for approximately 20 years next preceding, were E. J. Smyer, A. W. Smith, *2708  D. T. Smith, R. A. Terrell and E. L. Smith.  E. J. Smyer was president and had been continuously the president since the organization of the company.  E. L. Smith was vice president and treasurer, and B. Manly, secretary, during said fiscal year 1922, and had been continuously for approximately 20 years next preceding.  The directors of the Real Estate Mortgage Co. during 1922 and since the organization of the company were A. L. Smith, J. H. McCune, and F. H. Bryant.  A. L. Smith was the president, J. H. McCune was the vice president, and F. H. Bryant was the secretary and treasurer of said company continuously from its organization.  The stock of petitioner and the Real Estate Mortgage Co. during the taxable year and also the calendar year 1922 was owned as follows: StockholderShares of stock in Shares of stock in title companymortgage companyEstate of F. E. Smith50055A. W. Smith280120E. L. Smith240265D. T. Smith280120E. J. Smyer399168J. H. McCune5020F. Elbert Smith5020R. A. Terrell4217B. Manly104J. H. Terrell83A. L. Smith104F. H. Bryant204B. G. Smyer80R. S. Munger500J. H. Bryant300Alan M. Smith230Total outstanding stock2,000800*2709 *1222  Alan M. Smith was a son of E. L. Smith.  The relationship of the other stockholders does not appear.  OPINION.  LITTLETON: The question is whether substantially all of the stock of petitioner and the Real Estate Mortgage Co. was owned or controlled by the same interests so as to result in such corporations being affiliated in 1922 as held by the Commissioner.  We are of the opinion, from the facts disclosed, that the Commissioner correctly held the corporations to be affiliated within the meaning of section 240(c)(2) of the Revenue Act of 1921.  ; ; ; ; . Judgment will be entered for the respondent.