Court Opinion

ID: 4633967
Source: CourtListenerOpinion
Date Created: 2020-11-21 03:15:01.49712+00
Date Added: 2024-06-11T07:58:08.936088
License: Public Domain

SMITH AGRICULTURAL CHEMICAL CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Smith Agricultural Chemical Co. v. CommissionerDocket No. 13179.United States Board of Tax Appeals11 B.T.A. 902; 1928 BTA LEXIS 3699; April 30, 1928, Promulgated *3699  Invested capital may not be reduced in determining the extent to which a dividend is paid from current earnings of a year by a "tentative tax" theoretically set aside out of earnings pro rata over such year.  H. A. Mihills, Esq., for the petitioner.  Frank S. Easby-Smith, Esq., for the respondent.  TRAMMELL*902  This is a proceeding for the redetermination of a deficiency in income and profits taxes for the fiscal year ended October 31, 1920, in the amount of $4,081.53.  The error alleged is that the respondent "has reduced taxpayer's invested capital in determining the extent to which a dividend is paid from current earnings by a tentative tax theoretically set aside out of earnings pro rata over the year." FINDINGS OF FACT.  The petitioner is an Ohio corporation with its principal office at Columbus.  On January 2, 1920, the petitioner declared a dividend of $91,400 which was payable and was paid on January 6, 1920.  On the latter date the taxable income for the fiscal year ended October 31, 1920, prorated for the period to January 6, 1920, was $73,509.22.  The respondent in computing the invested capital for the fiscal year involved, *3700  assumed an obligation to pay income and profits taxes for the fiscal year ended October 31, 1920, amounting to $127,762.52, which sum when prorated to the period to January 6, 1920, resulted in reducing the amount of income available for dividends in the amount of $23,240.01.  The books of account of the petitioner during the taxable years involved were kept upon the accrual basis.  OPINION.  TRAMMELL: The question here involved is governed by previous decisions of the Board and upon authority of those decisions it is held that the invested capital of the petitioner should not be reduced in determining the extent to which a dividend is paid from current carnings of the year by a "tentative tax" theoretically set aside out of earnings pro rata over the year.  ; ; ; ; *3701 ; *903 ; All . Ordered that judgment pursuant to the findings of fact and opinion be rendered under Rule 50.