J. L. Owens Co. v. Commissioner

APPEAL OF J. L. OWENS CO.

J. L. Owens Co. v. Commissioner

Docket No. 1320.

United States Board of Tax Appeals

2 B.T.A. 227; 1925 BTA LEXIS 2483;

June 30, 1925, Decided Submitted May 20, 1925.

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W. Yale Smiley, Esq., for the taxpayer.

W. Frank Gibbs, Esq., for the Commissioner.

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Before GRAUPNER, TRAMMELL, and PHILLIPS.

This is an appeal from deficiencies in income and profits taxes determined by the Commissioner as follows:

Fiscal year ended March 31, 1918	$429.94
Fiscal year ended March 31, 1919	340.43
Fiscal year ended March 31, 1920	44.79
Total deficiency	815.16

The petition filed is based on three allegations of error. Two of the allegations were waived by the taxpayer in a stipulation filed at the hearing, leaving in issue only the question whether the Commissioner erred in excluding from invested capital the sum of $59,000, representing the par value of 590 shares of common capital stock of the taxpayer which had been issued and were reacquired by the taxpayer in 1916.

From the pleadings and stipulation filed, the Board makes the following

FINDINGS OF FACT. organized in 1894 with an authorized capital stock of $150,000. Its principal office is at Minneapolis, Minn.

2. The J. L. Owens Manufacturing Co. was incorporated in 1908 as a Maine corporation, principally for the purpose of selling the products of the taxpayer.

3. In 1908 R. L. Owens, O. L. Owens, and J. J. Owens transferred to the J. L. Owens Manufacturing Co. 590 shares of the capital stock of the taxpayer which they owned, and received in exchange therefor certain stock of the J. L. Owens Manufacturing Co.

4. The J. L. Owens Manufacturing Co. commenced business in 1908. By the year 1916 it had become so involved that its sole and remaining asset was the 590 shares of capital stock of the taxpayer, and it was indebted to the taxpayer in the sum of $62,256.36.

5. In the year 1916 the taxpayer foreclosed by court proceedings on the 590 shares of its capital stock held by the J. L. Owens Manufacturing Co. and became the owner thereof, and carried the stock as an asset on its books in the sum of $59,000.

6. When the stock was acquired by the taxpayer in 1916 it was carried on its books at $62,256.36, as an asset entitled "Stock Trust a/c."

7. The outstanding capital stock as determined by the revenue agent, and the surplus and undivided profits, were as follows:

	Outstanding capital stock.	Surplus and undivided profits.
As of Mar. 31, 1917	$2,000.00	$195,558.23
As of Mar. 31, 1918	2,000.00	216,053.58
As of Mar. 31, 1919	2,000.00	231,387.56

DECISION.

The determination of the Commissioner is approved.