Kanawha City Co. v. Commissioner ( 1928 )

OPINION.

Teammell:

The errors assigned are: (1) That the respondent erred in reducing petitioner’s invested capital for 1921 on account of prior-years’ taxes, (2) that the respondent failed to include in petitioner’s invested capital for 1920 and 1921 the excess of the actual cash value of the real estate acquired by it on July 2, 1914, above the amount of $300,000, representing the par value of its entire capital stock issued therefor, and (3) that the respondent failed to use as the basis for computing the gains derived from subsequent sales of real estate the fair market value thereof on July 2, 1914.

With respect to the first assignment of error, we are of the opinion that the action of the respondent is correct, and is approved subject to such adjustment in the amount of tax liability for 1920 as may result from our decision with respect to the remaining errors assigned by the petitioner. Russel Wheel & Foundry Co., 3 B. T. A. 1168; B. F. Boyer Co., 4 B. T. A. 180; Herald-Despatch Co., 4 B. T. A. 1096.

With respect to the other errors assigned by the petitioner, we are of the opinion, after a careful consideration of all the evidence, that the properties acquired on July 2, 1914, had actual cash values of at least the amounts set out in our findings of fact. The petitioner is accordingly entitled to have its invested capital for 1920 and 1921 increased by $928,675, representing the difference between $300,000, the amount of the par value of stock issued for the properties, and their total actual cash value on July 2, 1914, or $1,228,675.

Having found that the value of the properties acquired by the petitioner for its entire capital stock was $1,228,675 at the time of acquisition, we think, in the absence of any other evidence, that the value of the stock which represented the cost of the properties ivas equivalent to the value of the properties. William Ziegler, Jr., 1 B. T. A. 186; Charles T. Plunkett, et al., 3 B. T. A. 1265.

Judgment will be entered under Rule 50.