Lowell & Andover Railroad v. Commissioner

OPINION.

Littleton:

In Appeal of Providence & Worcester Railroad Co., 5 B. T. A. 1186, the Board held that the amount of tax upon the income of the lessor paid by the lessee, under the terms of a lease such as we have here, constituted additional taxable income to such lessor in the year in which such tax was payable by such lessee. On the authority of that decision petitioner’s tax for the fiscal period January 1 to November 30, 1919, should be recomputed by including in income the amount of $6,004.63 representing the tax upon petitioner’s income for the year 1918 paid in 1919.

As to the second issue, the petitioner did not change its accounting period from a calendar year to a fiscal year basis, or vice versa, and its return was not made under section 226 of the Revenue Act of 1918. The period January 1 to November 30, 1919, was the petitioner’s taxable year. The reason it filed a return covering only eleven months was that its separate existence ceased when it was absorbed by and merged with the Boston & Maine Railroad on December 1, 1919. The new consolidated corporation was just as much a separate entity from the petitioner as a decedent’s estate is a separate entity from the decedent. The reasoning and conclusion of the court in Bankers' Trust Co. v. Bowers, 295 Fed. 89, and Louis Hymel Planting & Manufacturing Co., 5 B. T. A. 910, apply with equal force in this instance. See also Carroll Chain Co., 1 B. T. A. 38; Lynch Construction Co., 3 B. T. A. 313; Arthur Walker & Co., 4 B. T. A. 151, and Durabilt Steel Locker Co., 5 B. T. A. 239. The Board is of the opinion therefore that the Commissioner erred in this regard and that he should have allowed a credit of the full amount of $2,000.

Reviewed by the Board.

Judgment will be entered on 15 days' notice, under Rule 50.