Appeal of Bradley Miller & Co. , 1 B.T.A. 941 ( 1925 )

OPINION.

Littleton:

The taxpayer has failed to introduce any evidence tending to show that its correct invested capital for 1917, 1918, and 1919 was affected by failure of the Commissioner to include therein the amounts of the book entry setting up a liability against its stockholders. So far as we can determine from the evidence it appears that the Commissioner did not reduce the invested capital as reflected in its capital stock and surplus accounts but simply refused to allow the amounts claimed as additions to invested capital. The Board is of the opinion that the Commissioner’s action was correct. Even if there existed an obligation on the part of the stockholders to repay the amounts to the corporation (which the evidence does not show that there was) this would be offset by the corporation’s liability on the notes executed tp the stockholders and discounted by them.

If the taxpayer’s contention is that the Commissioner reduced invested capital by the amount of the alleged accounts receivable for money advanced during the period from 1908 to 1906, we can find no error in his action. Under such contention it would appear that the corporation borrowed money which it gave to its stockholders and which was invested by them for their personal benefit. There is no evidence to show that the stockholders were not entitled to a like amount as a distribution out of surplus. From the evidence before the Board it appears that collection of the accounts claimed as invested capital was barred by the statute of limitation of six years (Howell’s Michigan Statutes, section 14185) and if, in fact, the amounts represented bona fide accounts receivable at the time they were advanced, they were valueless as an asset in 1917.