James T. Clark Co. v. Commissioner

JAMES T. CLARK CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

James T. Clark Co. v. Commissioner

Docket No. 3660.

United States Board of Tax Appeals

5 B.T.A. 1291; 1927 BTA LEXIS 3632;

January 31, 1927, Promulgated

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Fred L. Van Dolsen, Esq., for the petitioner.

F. O. Graves, Esq., for the respondent.

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TRUSSELL

TRUSSELL: The deficiency involved in this proceeding is in the amount of $1,298.91 for the fiscal year ended August 31, 1920, and arises in part from the Commissioner's elimination from invested capital of the sum of $16,014.01, resulting from adjustments made in the capital accounts for tools and fixtures and real estate.

FINDINGS OF FACT.

The petitioner is a corporation having its principal place of business at Newark, N.J., and has been engaged in the foundry business since 1902.

On January 1, 1906, the petitioner's ledger accounts of tools and fixtures showed a balance of $21,246.15. During the year 1906, and from January 1 to August 31, 1907, additions were charged to this account, increasing it to $22,044.90.

On September 1, 1907, the account was ruled off on the ledger and carried forward in the amount of $15,171.11, showing an arbitrary write-off of $6,873.79.

On September 1, 1908, there was a further arbitrary write-off of $1,000, and the account was carried forward as $14,171.11.

On September 1, 1909, as a result of an alleged physical inventory at cost of tools and fixtures then on hand and in use, the balance in this account was entered on the ledger in the amount of $26,696.91. The difference between this balance and the previous ledger balance is $12,525.80.

During the years 1910, 1911, and 1912, the petitioner made additions to its tools and fixtures account which were charged to expense in the first instance when purchased, and at the end of the year expense was credited and tools and fixtures charged with the amount of the additions. Such additions were -

1910	$305.44
1911	290.73
1912	1,195.46

During the year 1908 petitioner made additions and improvements to its office building at a cost of $646.88. It added to this amount a portion of a city tax assessment and charged real estate capital account with the sum of $698.58.

The amount which the Commissioner eliminated from petitioner's invested capital is shown as follows:

Tools and fixtures, 1908	$12,523.80
Tools and fixtures, 1910	305.44
Tools and fixtures, 1911	290.73
Tools and fixtures, 1912	1,195.46
		14,315.43
Real estate, 1908	698.58
Real estate, 1912	1,000.00
		1,698.58
		16,014.01

The arbitrary write-off of tools and fixtures account, aggregating $7,873.79, and the additions of $305.44 in 1910, $290.73 in 1911, and $1,195.46 in 1912, are proper and lawful additions to the tools and fixtures capital account for said years. The amount of $646.88, cost of additions to office building, is a proper and lawful addition to the real estate capital account for the year 1908.

The deficiency may be redetermined in accordance with the foregoing findings of fact, pursuant to Rule 50. Judgment will be entered in due course.