P. Hagerty Shoe Co. v. Commissioner , 15 B.T.A. 1034 ( 1929 )

P. HAGERTY SHOE CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

P. Hagerty Shoe Co. v. Commissioner

Docket No. 16023.

United States Board of Tax Appeals

15 B.T.A. 1034; 1929 BTA LEXIS 2743;

March 22, 1929, Promulgated

---

The invested capital of a corporation 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 such earnings pro rata over the year.

James O. Tripp, Esq., for the petitioner.

T. M. Mather, Esq., for the respondent.

---

LOVE

The petitioner appeals from determinations of deficiencies in income and excess-profits taxes for the calendar years 1920 and 1921, the amounts in controversy being $156.66 and $336.67, respectively.

Error is alleged in the respondent's reduction of invested capital for each of the years involved by amounts representing proportions of a tentative tax upon current earnings prorated to the dates of various dividend payments.

FINDINGS OF FACT.

The petitioner is an Ohio corporation with its principal office at Washington Court House.

Petitioner's net income for the year 1920 was $89,119.07. It declared and paid dividends during that year, and subsequent to the first 60 days thereof, as follows:

Date	Amount
June 24	$25,500
August 26	22,500
September 2	3,000
December 21	45,000
	96,000

The petitioner's net income for the year 1921 was $76,629.13. It declared and paid a dividend during that year and subsequent to the first 60 days thereof, to wit, on May 25, 1921, in the amount of $45,000. The respondent determined that current earnings at that date amounted to $19,199.04.

The respondent computed a tentative tax for each of the years involved and correspondingly adjusted the petitioner's surplus in an amount by which the dividends above mentioned, plus prorated proportions of the tentative tax, exceeded current earnings on the various dividend dates. The adjustments described resulted in reductions of the petitioner's invested capital as follows: 1920, $3,390.98; 1921, $15,621.95.

OPINION.

LOVE: We have heretofore held in , that the invested capital of a corporation may not be reduced in determining the extent to which dividends are paid from current earnings by a "tentative tax" theoretically set aside out of such earnings and prorated over the year.

Judgment will be entered under Rule 50.