Braunstein v. Commissioner , 16 B.T.A. 1330 ( 1929 )

LOUISE R. BRAUNSTEIN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Braunstein v. Commissioner

Docket No. 13776.

United States Board of Tax Appeals

16 B.T.A. 1330; 1929 BTA LEXIS 2387;

July 19, 1929, Promulgated

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Certain dividends were declared by a corporation, of which petitioner was a stockholder, December 26, 1923. The check for petitioner's dividend was made out and mailed to her after banking hours on the afternoon of December 31, 1923, but was not received by her until January 2, 1924. Held that the dividend was income to petitioner in 1924.

John C. Hermann, Esq., for the petitioner.

Paul Peyton, Esq., for the respondent.

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LITTLETON

The Commissioner determined a deficiency of $1,112.83 for 1923. The question is whether certain dividends declared December 26, 1923, and a check therefor mailed to the petitioner in the afternoon of December 31, 1923, but not received by her until January 2, 1924, constituted income in 1923 or 1924. Petitioner returned these dividends as income in 1924 and the Commissioner determined that the amount was income for 1923.

FINDINGS OF FACT.

Petitioner is a resident of Covington, Ky. She employed the cash receipts and disbursements method of accounting in reporting her income.

At December 31, 1923, the petitioner was the owner of 1,007 shares of the common and 776 shares of 6 per cent preferred stock of the Cambridge Tile Manufacturing Co., an Ohio corporation with principal place of business in Covington, Ky. December 26, 1923, the Cambridge Tile Manufacturing Co. declared a dividend of 10 per cent on its common stock and a quarterly dividend of 1 1/2 per cent on its preferred stock, payable according to the resolution of the board of directors, December 31, 1923. According to stock certificates, dividends on the preferred stock were payable on the first days of January, April, July, and October. The dividends in question were paid by checks, which were mailed to the parties entitled thereto, but were not mailed until after banking hours on December 31, 1923. The petitioner's stock entitled her to dividends amounting to $11,234, $10,070 of which was for the 10 per cent dividend declared on the common stock, and $1,164 for the quarterly dividend of 1 1/2 per cent on her preferred stock; both amounts were included in one check for $11,234, which was mailed to petitioner after banking hours on December 31, 1923, and was not received by her until January 2, 1924, on which date she promptly deposited the same in bank. No checks for any dividends declared on this date was mailed to stockholders prior to the afternoon of December 31, 1923. It was the custom and practice of the company to make payment of dividends by checks only, and the checks given for dividends declared on December 26, 1923, were all delivered to stockholders through the mail, and not otherwise. The dividends were not unqualifiedly subject to the demand of the petitioner in 1923. The corporation did not have sufficient funds in its general checking account to pay the dividends on December 31, 1923. It had considerable savings accounts in various banks and checks for the dividends were mailed after banking hours on December 31, 1923, so that sufficient funds to take care of the dividend checks could be withdrawn from the savings accounts and deposited in the general checking account on January 1 or January 2, 1924. This was the custom and practice of the corporation so that it would receive full interest on its savings deposits, as otherwise the corporation would have lost interest for six months had withdrawals from the savings accounts been made on December 31, 1923, to pay the dividends theretofore declared.

OPINION.

LITTLETON: Upon the facts disclosed by the record, we are of opinion that the dividends in question in this proceeding were not unqualifiedly subject to the demand of petitioner in 1923 and that she, therefore, properly reported the amount thereof as income for 1924. ; ; .

Judgment will be entered under Rule 50.