Lowy v. Commissioner ( 1959 )

Leo L. Lowy v. Commissioner.

Lowy v. Commissioner

Docket No. 11085.

United States Tax Court

T.C. Memo 1959-146; 1959 Tax Ct. Memo LEXIS 101; 18 T.C.M. (CCH) 636; T.C.M. (RIA) 59146;

July 17, 1959

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Corporate distributions: Funds diverted by stockholder. - The Tax Court held that funds withdrawn by taxpayer from his wholly-owned corporation were not income to him. The Tax Court found as facts: (1) Amounts withdrawn by taxpayer in cash were used to pay employees of the corporation vacation pay and accounts of the corporation charged with the payments were eliminated as chargeable to the taxpayer's account; (2) an amount withdrawn by taxpayer was used to settle a labor controversy existing between the corporation and some of its employees. The Commissioner also conceded that an amount withdrawn in 1941 was not income.

Maurice V. Seligson, Esq., for the petitioner. John J. Madden, Esq., for the respondent.

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TIETJENS

Memorandum Findings of Fact and Opinion

TIETJENS, Judge: In a Memorandum Findings of Fact and Opinion filed May 15, 1957 (T.C. Memo 1957-77">T.C. Memo. 1957-77) we sustained deficiencies for the years 1941 through 1943 and held that the deficiencies, at least in some part, were due to fraud with intent to evade tax. The Court of Appeals for the Second Circuit, on February 2, 1959, (262 F. 2d 809) affirmed, but remanded with directions that "For purposes of clarification further findings should be made as to: (1) sums allegedly paid for vacation expenses; (2) the $15,000 allegedly paid in settlement of the labor controversy; and (3) the $8,600 allegedly withdrawn by taxpayer from Rolbal in 1941."

Petitioner has filed a motion requesting certain findings to comply with the remand together with a supporting memorandum, and respondent has filed a memorandum in answer making certain concessions, among them, that there is no deficiency for 1941. We have carefully considered the arguments set forth in the memoranda and have restudied the record in the light of the remand. Because of respondent's concession it is unnecessary to make additional findings of fact as to the year 1941.

Findings of Fact

Sums Allegedly Paid for Vacation Expenses

Petitioner paid the following amounts to employees of American Rolbal Corporation as vacation pay:

1942	$6,500
1943	$9,000

These payments were made from amounts withdrawn in cash by petitioner from American Rolbal Corporation and charged to him on its records. Sometime after payment of the vacation pay was made, certain accounts of the Corporation were charged with the payments and they were eliminated as chargeable to petitioner's account. These amounts were not income to petitioner.

The $15,000 Allegedly Paid in Settlement of the Labor Controversy

Petitioner paid the sum of $15,000 in 1943 in settlement of a labor controversy existing between American Rolbal Corporation and certain of its employees. This sum was withdrawn by petitioner from the Corporation, was used for the purpose indicated, and was not income to him.

Opinion

The questions now raised in this case are factual and are disposed of by our additional findings. The adjustments in income which will be required can be reflected in a computation under Rule 50.

Petitioner asks for additional findings relative to alleged expenditures for recreation "for the entire plant" of Rolbal. Our interpretation of the opinion of the Court of Appeals herein and the directions in the remand is that this item is not within the scope of the remand.

Decision will be entered under Rule 50.