Potter v. Commissioner

A. E. POTTER, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Potter v. Commissioner

Docket No. 7432.

United States Board of Tax Appeals

10 B.T.A. 563; 1928 BTA LEXIS 4070;

February 7, 1928, Promulgated

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Certain dividends declared and credited in 1922, of which the petitioner did not receive notice until 1923, and certain dividends declared and credited in 1923, of which the petitioner did not receive notice until 1924, were, in the circumstances of this proceeding, income to the petitioner, employing the cash receipts and disbursements method of accounting, in the year in which he received notice of the dividends.

M. D. Cohen, C.P.A., and L. M. Cohen, C.P.A., for the petitioner.

W. H. Lawder, Esq., for the respondent.

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LITTLETON

The Commissioner determined a deficiency of $1,216.22 for the calendar year 1923. It is claimed that the Commissioner's determination is erroneous insofar as he increased income in the amount of $6,929, representing dividends declared by certain corporations of which the petitioner was a stockholder.

FINDINGS OF FACT.

Petitioner is a resident of Nashville, Tenn. He employed the cash receipts and disbursements method of accounting and made his income-tax return for 1923 to the collector for the district of Tennessee on that basis. During the taxable year petitioner was president of the Commerce-Union Bank and the Broadway National Bank. The Broadway National Bank on December 30, 1922, declared a dividend and petitioner's portion thereof was $654. Profit and loss was debited with this dividend and the stockholders' accounts credited on December 30, 1922. On that date the bank mailed notice of the dividend to the petitioner. Petitioner received notice of the dividend credited to his account on January 2, 1923. Petitioner reported this dividend as income for 1923. The Commissioner held that it was income for 1922. Further dividends were declared by this bank, which were credited to petitioner's account during 1923 as follows:

Date of dividend	Date credited and notice	Amount
	mailed to petitioner
March 31, 1923	March 31, 1923	$981
June 30, 1923	June 30, 1923	978
September 29, 1923	September 29, 1923	1,098
December 31, 1923 (regular 3 per cent)	December 31, 1923	3,579
December 31, 1923 (extra 3 per cent)	December 31, 1923	3,579

During 1923 the petitioner received notice of the declaration and crediting of the above-mentioned dividends, with the exception of the two dividends mentioned of $3,579, declared December 31, 1923. Notice of the declaration and crediting of these dividends was mailed to the petitioner on December 31, 1923, and such notice and a check for the extra 3 per cent dividend were received by petitioner on January 2, 1924. Petitioner did not include in his income for 1923 the last two mentioned dividends of $3,579 each, upon the ground that he did not receive notice thereof until 1924 and that they were not therefore unqualifiedly subject to his demand. The Commissioner added these dividends to petitioner's 1923 income, thereby determining that the dividends received amounted to $10,215.

The Commerce-Union Bank on December 31, 1922, declared a dividend, the petitioner's portion of which was $200, and on that date the bank debited profit and loss with the amount of the dividend and credited the stockholders' account. Notice of the declaration of the dividend was mailed to petitioner on December 31, 1922, and petitioner received this notice on January 2, 1923. He reported this dividend as 1923 income. The Commissioner treated the dividend as 1922 income. On June 30, 1923, this bank declared a dividend, which was debited to profit and loss and credited to the stockholders' accounts on the same date. Notice was mailed to the stockholders on June 30, 1923. Petitioner's portion of this dividend was $937.50. He received the notice thereof in 1923 and reported the dividend as income for that year. This action was approved by the Commissioner. On December 31, 1923, this bank declared a dividend, petitioner's portion of which was $625. This dividend was debited to profit and loss and credited to the stockholders' accounts on the books of the bank on December 31, 1923. Notice of declaration and credit of this dividend was mailed to the stockholders by the bank on December 31, 1923. A check for this dividend was also mailed to petitioner by the bank on December 31, 1923. Petitioner received notice of the declaration and crediting of the dividend and the check for his portion thereof on January 2, 1924. Petitioner did not include the last-mentioned dividend in his income for 1923, upon the ground that he did not receive it or have notice of it and that it was not therefore unqualifiedly subject to his demand. The petitioner reported as income for 1923 the dividends of $200 and $937.50, totaling $1,137.50. The Commissioner excluded the dividend of $200 and included the dividends of $937.50 and $625, thereby determining that petitioner's income on account of dividends from this bank for 1923 was $1,562.50.

OPINION.

LITTLETON: The facts in this proceeding bring it within the decision of the Board in . The evidence in the record shows that the petitioner did not receive the dividends declared on December 31, 1922, or notice thereof, until 1923, and that he did not receive the dividends declared on December 31, 1923, or notice thereof, until 1924. On the authority of the decision of the Board in , it is the opinion of the Board that the income reported by the petitioner for 1923, arising from the dividends of the banks mentioned, was correct and that the Commissioner erred in excluding the dividends declared in December, 1922, and received in 1923, and including the dividends declared in 1923 and received in 1924.

Reviewed by the Board.

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

PHILLIPS, GREEN, LOVE, and ARUNDELL dissent.