Appeal of the Warren Co. , 3 B.T.A. 1154 ( 1926 )

OPINION.

Phillips

: For the year 1921 the taxpayer has paid no tax and the Commissioner has found no tax to be due and has asserted no deficiency. The deficiency for 1920 is not affected by the determination of the net income for 1921, and in these circumstances there is nothing-before the Board for its determination with reference to 1921. The appeal, so far as it relates to that year, must be dismissed.

During 1919 the taxpayer paid its officers salaries of $12,300. In 1920 it increased the monthly credits for salaries, and in this manner, during the year, credited its officers with $11,400 as salaries, which amount has been allowed as a deduction by the Commissioner. In December, 1920, it credited the accounts of its officers with the additional sum of $11,700, claimed by it to be additional salaries.. This amount was disallowed as a deduction by the Commissioner. It was divided between the officers substantially upon the basis of their stock ownership. No dividend was declared in 1920, although the taxpayer’s business was much more successful in that year than in 1919 when dividends had been declared. In such circumstances, we are not inclined to disturb the determination of the Commissioner without some convincing proof that the payments were reasonable compensation for the services rendered. No such proof has been furnished, except with respect to C. L. Warren. We are satisfied that the additional $1,200 credited to him in December, 1920, together with his other compensation, was reasonable compensation for the services he performed, and the net income for 1920, as computed by the Commissioner, should be reduced by $1,200.

Order dismissing the appeal as to the year 1921 and redetermining tax for 1920 will he entered on IB days’ notice, under Rule 50.