National Map Co. v. Commissioner

NATIONAL MAP CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

National Map Co. v. Commissioner

Docket No. 14674.

United States Board of Tax Appeals

17 B.T.A. 1098; 1928 BTA LEXIS 3077;

October 28, 1928, Promulgated

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On the facts here presented, held that the petitioner acquired certain map plates in October, 1920.

Leroy Sanders, Esq., for the petitioner.

T. M. Mather, Esq., for the respondent.

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TRAMMELL

This is a proceeding for the redetermination of a deficiency in income and profits taxes for the fiscal year ended November 30, 1920, in the amount of $4,795.87, of which $3,833.33 is in controversy. The only matter in controversy is whether the petitioner purchased certain map plates in January, 1920, or in October of that year.

FINDINGS OF FACT.

The petitioner is an Indiana corporation with its principal office at Indianapolis. Its business is the selling of what is generally known as commercial maps, consisting principally of large scale state maps, and maps of the United States, such as are used in offices and for business purposes generally.

Prior to 1914 and 1915, the petitioner had its maps printed by the Matthews, Northrup Works, located at Buffalo, N.Y. The maps furnished the petitioner up to that time were printed from plates made for it by the Matthews, Northrup Works under contract and retained at the factory at which additional maps were printed from time to time as ordered by the petitioner. In 1914 or 1915 the petitioner arranged with the George F. Cram Co. of Chicago to furnish some state maps from plates owned by that company. Later, arrangements were made for that company to furnish some maps from plates made for the purpose of printing maps for the petitioner. Some time following 1915 the petitioner transferred from Buffalo to the George F. Cram Co. all of the plates that it owned in Buffalo. Some of the maps furnished the petitioner in 1919 by George F. Cram Co. were made from a few plates which the petitioner owned; the others, consisting of a large quantity, were from plates owned by the Cram Co. and used only for printing maps for the petitioner.

During the years ending with the fall of 1918 the petitioner's business had been interfered with by the war. However, in 1919 it showed a substantial increase and it was felt that with the anticipation of a continuation of the business, the petitioner was in a precarious situation because of the large amount of business it was doing in the sale of maps from plates owned by another company. Beginning in the fall of 1919, the president of the petitioner had several discussions with George F. Cram, president of the George F. Cram Co., relative to the sale to the petitioner of the plates being used in printing maps for the petitioner. After deciding upon the plates desired for the petitioner, the president of the petitioner discussed the matter of the price with his associates and a price of $40,000 was decided upon for the plates. About January 8 or 10, 1920, an offer to purchase the plates for $40,000 was made by the petitioner's president to Cram, who accepted it. Thereafter no other meeting was had with Cram on the subject. It was understood at the time that the petitioner would not be able to pay for the plates then, but probably would be able to do so in the following fall. Prior to January, 1920, the plates were in the possession of the George F. Cram Co. and have continued to be in its possession ever since.

During 1920 the board of directors of the petitioner never met until in September. One of the directors was stationed at Dallas, Tex., and the duties of another caused him to travel most of the time. Consequently, for one reason or another there was no meeting of the directors. The president of the petitioner considered that the purchase of $40,000 worth of plates was an unusual event in the business life of the petitioner and so he called a meeting of the board of directors in September, 1920. The minutes of the meeting on September 7, 1920, are as follows:

Meeting of Board of Directors held September 7th, 1920, Present E. A. Peterson, Chairman, W. S. Spring, and J. W. Taylor.

Moved by Mr. Spring, seconded by Mr. Taylor, that the President be authorized to negotiate the purchase of such plates now owned by the George F. Cram Company, Chicago, Illinois which have been used for printing maps for the National Map Company, and which should be owned by the National Map Company for the protection of its best interests, the purchase price not to exceed $40,000.

Carried.

Meeting duly adjourned.

J. W. Taylor, September 7, 1920.

The following are the minutes of a meeting of the board of directors of George F. Cram Co. held on October 18, 1920:

At a meeting of the Board of Directors of the George F. Cram Company, held at the office of said company at the hour of 4:30 P.M. on Monday, the 18th day of October A.D. 1920, at which meeting all of the directors being present among other things the following resolution was unanimously adopted:

Resolved, that George F. Cram Company, a corporation, sell to National Map Company, a corporation, of Indianapolis, Indiana, for the sum of Forty Thousand dollars, the following map plates, and the President, George F. Cram be and hereby is directed to deliver to said National Map Company, a bill of sale for same: [Here appears a description of the map plates.]

Also all copyrights and rights in and to above plates which are now located at Eight (8) floor, 111 N. Market St., Chicago, Illinois.

I, George F. Cram, President, and Herman De Vries, Secretary, certify that George F. Cram is President and Herman De Vries is Secretary, of George F. Cram Company, a corporation, and we hereby further certify that the foregoing resolution was unanimously adopted by all of the Board of Directors on Monday the 18th day of October A.D. 1920, at 4:30 P.M.

(Seal)

(Signed) GEORGE F. CRAM,

President.

(Signed)

Herman DeVries

Attest. Sec'y.

A bill of sale executed on an undisclosed date in October, 1920, by George F. Cram Co. provides in part as follows:

KNOW ALL MEN BY THESE PRESENTS, ThatGeorge F. Cram Company, a corportion, of the City of Chicago, in the County of Cook and State of Illinois, party of the first part, for and in consideration of the sum of Forty Thousand ($40,000.00) Dollars, lawful money of the United States of America, to it in hand paid, at or before the ensealing and delivery of these Presents, by National Map Company, a corporation, of Indianapolis, Indiana, of the second part, the receipt whereof is hereby acknowledged, has granted, bargained, sold and delivered, and, by these Presents does grant, bargain, sell and deliver, unto the said party of the second part, all the following GOODS, CHATTELS, and PROPERTY, to-wit: [Here appears a description of the plates.]

Also all copyrights and rights in and to above plates which are now located at Eighth (8th) floor, 111 No. Market Street, Chicago, Illinois.

To have and to hold the said Goods, Chattels and Property unto the said party of the second part, its heirs, executors, administrators, and assigns, to and for its own proper use and behoof, forever.

And the said party of the first part does vouch itself to be the true and lawful owner of the said Goods, Chattels and Property, and have in itself full power, good right and lawful authority, to dispose of the said Goods, Chattels and Property, in manner as aforesaid: And it does, for its heirs, executors and administrators, covenant and agree to and with the said party of the second part, to Warrant and Defend the said Goods, Chattels and Property to the said party of the second part, its executors, administrators, and assigns, against the lawful claims and demands of all and every person and persons whomsoever.

Payments for the plates were made by check as follows:

October 6, 1920	$8,000
October 25, 1920	10,000
October 25, 1920	22,000

In the summer of 1920 George F. Cram instructed the department manager of George F. Cram Co. to take an inventory of the company's machinery, map plates, type and other appliances used in connection with the work, and informed him that in taking the inventory he should omit the plates here involved.

In determining the deficiency here involved, the respondent determined that the petitioner acquired the plates in October, 1920, and allowed depreciation on them for one month at an annual rate of 25 per cent.

OPINION.

TRAMMELL: The only question before us is whether the petitioner acquired the plates in January, 1920, or in October of that year. If the plates were acquired in January, 1920, the petitioner is entitled to depreciation on them from then until the close of its fiscal year, November 30, 1920, whereas if the plates were not acquired until October, 1920, the petitioner would be entitled to depreciation only from October to the end of the fiscal year.

The petitioner contends that the transaction which took place between its president and Cram in January, 1920, was a sale, by which it acquired the plates and not a contract of sale.

While the record does not show where the transaction in January, 1920, between the president of the petitioner and Cram took place, it indicates that some of the conferences held in the fall of 1919 were in Chicago. As there is nothing to indicate that any of the conferences were held elsewhere, or that the transaction took place elsewhere, we think it reasonable to conclude that it also took place in Chicago. Consequently the validity and interpretation of the transaction would be governed by the laws of Illinois.

Callaghan's Illinois Statutes Annotated, vol. 7, ch. 121 a, par. 4, sec. 1, provides as follows:

(1) A contract to sell goods is a contract whereby the seller agrees to transfer the property in goods to the buyer for a consideration called the price.

(2) A sale of goods is an agreement whereby the seller transfers the property in goods to a buyer for a consideration called the price. (Italics ours.)

Paragraph 21, section 18 provides:

(1) Where there is a contract to sell specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.

(2) For the purpose of ascertaining the intention of the parties, regard shall be had to the terms of the contract, the conduct of the parties, usages of trade and the circumstances of the case.

While the evidence shows that in January, 1920, the president of the petitioner offered Cram $40,000 for the plates and Cram accepted the offer, it was September 7, 1920, before formal action with respect to the plates was taken by the board of directors of the petitioner. The action then taken was to authorize the president of the petitioner "to negotiate the purchase" of plates then "owned by the George F. Cram Company" and "which should be owned by" the petitioner. If the transaction in January, 1920, had been a sale by which the petitioner acquired the plates it is not clear why the board of directors in September should be authorizing the president of the petitioner to purchase plates then owned by the petitioner, neither is it clear why, if the plates were owned by the petitioner, the directors should refer to them as being owned by the George F. Cram Co. and state that they should be owned by the petitioner. Especially is this true since of the three directors present at the meeting, one was the president of the petitioner and one of the others had been informed early in the year as to what had transpired between the president of the petitioner and Cram. From the foregoing, we think it is clear that the directors of the petitioner did not consider that the petitioner was the owner of the plates at the time they adopted this resolution. No formal action with respect to the sale or disposition of the plates was taken by the George F. Cram Co. prior to October 18, 1920, when its board of directors authorized the sale of the plates to the petitioner and directed its president to deliver to the petitioner a bill of sale for them. Although the bill of sale does not show on what date in October it was executed, nor does the record show when it was delivered, we think it is reasonable to conclude that it was executed and delivered pursuant to the direction contained in the resolution of October 18, 1920, on that or some subsequent date in October, 1920. The bill of sale recites the sale and delivery of the plates to the petitioner and also vouches that the George F. Cram Co. was the true and lawful owner of them.

The petitioner relies on the fact that when an inventory was taken for the George F. Cram Co. in the summer of 1920, Cram directed that the plates here involved be omitted from the inventory. We do not think this is controlling, since there could be other reasons for omitting them than that they had been sold to the petitioner.

Considering all the facts in the case, we are unable to find that the transaction in January, 1920, was a sale. From the record we do not think the George F. Cram Co. transferred or intended to transfer at that time to the petitioner the property in the plates. It is our opinion that the property in the plates was not transferred to the petitioner prior to the passage of the resolution on October 18, 1920, by the board of directors of the George F. Cram Co. authorizing the sale of the plates to the petitioner and the delivery of the bill of sale for them to the petitioner. Accordingly, we are of the opinion that the petitioner's contention that it acquired the plates in January, 1920, must be denied and the action of the respondent approved.

Judgment will be entered for the respondent.