Rhode Island Tool Co. v. Commissioner , 3 B.T.A. 180 ( 1925 )

APPEAL OF THE RHODE ISLAND TOOL CO.

Rhode Island Tool Co. v. Commissioner

Docket No. 2832.

United States Board of Tax Appeals

3 B.T.A. 180; 1925 BTA LEXIS 2012;

November 28, 1925, Decided Submitted May 13, 1925.

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Invested capital computed under the decisions in Appeal of L. S. Ayers & Co.,1 B.T.A. 1135">1 B.T.A. 1135, and Appeal of Guarantee Construction Co.,2 B.T.A. 1145">2 B.T.A. 1145.

Edward McCarthy, Esq., and George M. Wolcott, Esq., for the taxpayer.

J. Harry Byrne, Esq., for the Commissioner.

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STERNHAGEN

Before STERNHAGEN, GREEN, and LOVE.

This is an appeal from the determination of a deficiency in income and profits taxes for the years 1918 and 1919 in the amounts of $26,777.54 and $1,217.17, respectively. The facts are not in dispute, the issues being whether, under the Revenue Act of 1918, the Commissioner properly reduced the invested capital of the taxpayer (1) on account of dividends paid in the taxable years, and (2) on account of the prorating of the Federal income and profits taxes payable within such years. In its petition the taxpayer alleged that the Commissioner erred in his selection of comparatives on the basis of which the taxpayer's application for special assessment for the years 1918 and 1919 had been denied, and that the Commissioner further erred in reducing the taxpayer's 1918 and 1919 invested capital, respectively, by prorating the amounts of dividends paid on January 15, 1918, and January 15, 1919. At the hearing of the appeal these two grounds were withdrawn by the taxpayer.

FINDINGS OF FACT.

The taxpayer is a Rhode Island corporation with its principal office in the city of Providence.

The Federal income and excess-profits taxes of the taxpayer for the year 1917, amounting to $165,289.52, were paid on June 15, 1918. The Commissioner reduced the taxpayer's invested capital for the year 1918 in the amount of $90,569.60, representing the prorated 1917 Federal income and excess-profits taxes, and by $12,887.53, representing the prorated amounts of dividends in excess of current earnings after accruing and deducting from these earnings the socalled "tentative tax." The dividends paid by the taxpayer in the taxable year 1918 amounted to $103,500 and were paid as follows:

Date of payment.	Amount of dividend.
Jan. 15, 1918	$19,500
Apr. 15, 1918	34,500
June 1, 1918	15,000
July 15, 1918	34,500
Total	103,500

The Federal income and excess-profits taxes of the taxpayer for the year 1918 were paid in quarterly installments during the year 1919 in amounts of $34,767.90 each. The Commissioner reduced the taxpayer's invested capital for the year 1919 in the amount of $58,771.66, representing the prorated 1918 Federal income and excess-profits taxes, and by $6,443.02, representing the prorated amounts of dividends in excess of current earnings after accruing and deducting from these earnings the so-called "tentative tax." The dividends paid by the taxpayer in the taxable year 1919 amounted to $138,000 and were paid as follows:

Date of payment.	Amount of dividend.
Jan. 15, 1919	$19,500
Apr. 15, 1919	34,500
May 1, 1919	15,000
July 15, 1919	34,500
Oct. 15, 1919	34,500
Total	138,000

DECISION.

The deficiency should be computed in accordance with the foregoing findings of fact and the following opinion. Final determination will be made on 15 days' notice, in accordance with Rule 50.

OPINION.

STERNHAGEN: Since this appeal was filed the Board has decided the , and the . From the opinions in those cases, which we need not now repeat, it is clear that the position of the taxpayer as to the proper determination of invested capital in respect of Federal income and profits taxes based on the income for preceding years must be sustained, except in so far as concerns the dividends paid January 15 of each year, which dividends are deductible in full from invested capital of the year from the date paid. Sec. 201(e), Revenue Act of 1918.