Brannum Lumber Co. v. Commissioner , 2 B.T.A. 821 ( 1925 )

APPEAL OF BRANNUM LUMBER CO.

Brannum Lumber Co. v. Commissioner

Docket No. 2836.

United States Board of Tax Appeals

2 B.T.A. 821; 1925 BTA LEXIS 2242;

October 12, 1925, Decided Submitted May 12, 1925.

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William S. Hammers, Esq., for the taxpayer.

P. S. Crewe, Esq., for the Commissioner.

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Before JAMES, LITTLETON, SMITH, and TRUSSELL.

This is an appeal from the determination of a deficiency in income and profits tax for the calendar years 1918 and 1919, in the amounts of $865.80 and $1,143.14, respectively, arising from the refusal of the Commissioner to permit taxpayer and the Union Grove Lumber Co. to file a consolidated return for each of those years.

FINDINGS OF FACT.

Taxpayer is a Wisconsin corporation with principal offices and place of business at Racine, where, since 1909, it has been engaged in selling lumber at retail.

In 1909 W. S. Brannum, a resident of Chicago, Ill., agreed to finance his son, J. H. Brannum, who desired to embark upon the lumber business at Racine, Wis. Thereupon taxpayer was organized with a capital stock of $25,000 with a par value of $100 per share. On July 26, 1909, W. S. Brannum paid into the corporation the sum of $25,000 in cash for all of its capital stock. He caused 85 shares to be issued to himself; 85 shares to his wife, E. Z. Brannum; 70 shares to his son, J. H. Brannum; and 10 shares to his son's wife, J. A. Brannum. Later a 100 per cent stock dividend was declared and distributed to each of the four stockholders in proportion to their holdings.

During 1915 J. H. Brannum organized the Union Grove Lumber Co., for the purpose of having it purchase a retail lumber yard at Union Grove, Wis. This corporation had an authorized capital stock of $50,000, with only $30,000 paid in, as follows: $20,000 by W. S. Brannum and $10,000 by J. H. Brannum, for which 200 shares were issued to W. S. Brannum and 100 shares to J. H. Brannum. One share of the stock issued to W. S. Brannum was later transferred to Merritt Anderson for the purpose of qualifying him to become treasurer of the corporation.

During the years 1918 and 1919 the stock of the two corporations was held as follows:

	Brannum Lumber Co.		Union Grove Lumber Co.
	Shares.	Per cent.	Shares.	Per cent.
J. H. Brannum	140	28	100	33 1/3
J. A. Brannum, wife of J. H. Brannum	20	4
W. S. Brannum	170	34	199	66 1/3
E. Z. Brannum, wife of W. S. Brannum	170	34
Merritt Anderson			1	1/3

J. H. Brannum, since the organization, has had entire charge and management of both corporations, discussing the business only in a general way with his father when in Chicago. E. Z. Brannum and J. A. Brannum have never voted the stock issued to them. They took no interest in the affairs of the corporations and always gave proxies to their husbands. W. S. Brannum and J. H. Brannum owned or controlled substantially all of the stock of both corporations.

DECISION.

The deficiency for the years 1918 and 1919 should be computed upon the basis of consolidated returns. Final determination will be settled on consent or on 15 days' notice, in accordance with Rule 50.