Moser v. Keller ( 1957 )

On Motion for Rehearing

COIL, Commissioner.

In their motion for rehearing, defendants contend that the principal opinion failed to take into account the impact, income-tax-wise, of the result of our holding as to two items. We held that the sum of $11,348.14, which was a credit due the National Bank because of prior overpayment of insurance premiums, should have been treated, for the purpose of fixing the selling price of the stock, the same as though cash had been received by the bank in that amount prior to July 6, 1951. We also held that an item shown on the books of the bank as a liability as of July 6, 1951, styled “Unearned Discount on Installment Loans,” in the sum of $48,278.27, should have been eliminated as a liability, which, of course, thereby increased the undivided profits account by that amount.

It would appear that if we correctly have required the bank, in so far as its accounting with the certificate holders is concerned, to treat the $11,348.14 credit as cash, then it must follow that that amount was income which was not, but should have been, taken into account by the bank in figuring its reserve for taxes as of July 6, 1951. It would also appear that inasmuch as we have required the bank to eliminate from its liabilities as of July 6, 1951, $48,-278.27 unearned discount on installment loans, and have thereby added that amount to undivided profits, such unearned discount must of necessity have passed through the “interest received account” as income. Thus it seems clear that the reserve for taxes as of July 6, 1951, also should have taken into account the amount of income tax which would have been due had the bank’s books reflected the unearned discount on installment loans account as we have said it should have reflected it.

It follows that we should have held, and we hereby modify our opinion and hold,, that by reason of the manner in which we have required the defendants to treat the FDIC credit and the Unearned Discount on Installment Loans account, the reserve for taxes which we allowed in the principal opinion in the sum of $51,197.77 should have been allowed in the sum of $80,443.63. The effect of which holding is to decrease the amount which should have been paid by the Trust Company as shown at page 23 of the (typewritten) principal opinion [303 S.W.2d 149] to $1,843,962.43, and to thereby decrease the difference in the amount which should have been paid and the amount which was paid by the Trust Company to $76,132.67.

The foregoing adjustments are arrived at in this manner:

PDIC credit treated as cash $11,348.14

Total surtax and normal tax rates applicable to such additional amount of income (shown by defendants’ Ex. 20) 50% per cent. Applied, results in additional income tax which would have been due and thus the reserve for taxes should have been increased by $ 5,759.18

Elimination of unearned discount on installment loans which discount as a result went into income $48,278.27

Less item never deducted for income tax purposes (allowed defendants on p. 23 of typewritten opinion [303 S.W.2d 149] as “salaries incurred but not paid”) $ 2,905.61

$45,372.66

Total surtax and normal tax rates (50%%) applicable to such additional amount of income. Applied, results in additional income tax which would have been due and thus the reserve for taxes should have been increased by $23,026.62

Mathematical error of $460.06 in the item shown on p. 23 of the principal opinion [303 S.W.2d 149] as “Increase in Reserve for Taxes.” Item there shown as $1,281.35; should have been $1,-741.41; thus increasing reserve for taxes $460.06

Total increase in Reserve for Taxes $29,245.86

That increase subtracted from $1,873,208.29 (amount shown as that which should have been paid by Trust Company, p. 23 of typewritten opinion [303 S.W.2d 149]) leaves the sum of $1,843,962.43 as the amount which should have been paid by Trust Company.

The opinion is further modified by substituting the following sentence for the last sentence of the third paragraph which appears on page 14 of the typewritten opinion [303 S.W.2d 144]: “It appears, therefore, that the amount of that credit, $11,-348.14, should have been treated as an asset for the purpose of determining the selling price of the stock.”

It is therefore ordered that:

Motion of plaintiffs-appellants for modification of the opinion, or for rehearing, or to transfer to court en banc, is overruled;

Motion of defendants-appellants for rehearing, or to transfer to court en banc, or for modification of the opinion, is overruled ;

The opinion is modified on the court’s own motion in the respects hereinabove indicated and the case is remanded to the trial court with directions to enter a judgment consistent with this opinion.

VAN OSDOL and HOLMAN, CC., concur.

PER CURIAM.

The foregoing opinion by COIL, C., is. adopted as the opinion of the court.

All concur.