DocketNumber： Docket No. 11311.
Citation Numbers： 13 B.T.A. 286, 1928 BTA LEXIS 3280
Judges： Murdock
Filed Date： 8/28/1928
Status： Precedential
Modified Date： 1/12/2023
1928 BTA LEXIS 3280">*3280 Special assessment denied.
13 B.T.A. 286">*286 Income and excess-profits taxes for the fiscal year ending October 31, 1918, in the amount of $740.37 are in controversy for the single reason that the petitioner contends for special assessment. The Commissioner has held and contends that the petitioner is not entitled to special assessment. Under Rule 62(b) the proceeding was limited to the question of whether or not the petitioner is entitled to have its tax determined as provided in section 210 of the Revenue Act of 1917 and 328 of the Revenue Act of 1918.
FINDINGS OF FACT.
The petitioner was incorporated in 1909, under the laws of Pennsylvania. It is engaged in selling electrical supplies, both wholesale and retail, at Pittsburgh.
In 1901 the Iron City Engineering Co. was organized and took over the business of a partnership. It did electrical contracting and sold electrical supplies wholesale. The petitioner was organized to take over the sales department of the Iron City Engineering Co. The latter company continued, doing only electric contracting. 1928 BTA LEXIS 3280">*3281 The Iron City Engineering Co. transferred certain assets at $53,811.50 subject to certain liabilities in the amount of $27,811.50 to the petitioner for $25,000 par value of the common and $1,000 par value of the preferred stock of the petitioner. At this time the Iron City Engineering Co. represented certain manufacturers of electrical supplies and had a number of customers to whom it had sold supplies. The petitioner succeeded to these relations. The petitioner thereafter sold supplies to the Iron City Engineering Co. at market prices. In such sales the petitioner incurred no sales expense.
For the taxable year the Commissioner determined that the petitioner's gross sales amounted to $1,250,023.63, from which its gross 13 B.T.A. 286">*287 income was $212,798.79; total gross income was $238.907.73 and net income $86,446.18; invested capital was $155,383.94; and its excess-profits tax at 1917 rates was $32,927.30, at 1918 rates, $54,326.23, and its tax for the fiscal year, $54,298.37.
OPINION.
MURDOCK: The petitioner offered evidence for the purpose of showing that it received good will of a certain value at the time of its incorporation. We need not decide whether or not this1928 BTA LEXIS 3280">*3282 evidence established a value in dollars for this alleged good will because in any event it would not show that invested capital could not be satisfactorily determined. The petitioner argued that the evidence proved a value and therefore invested capital could not be satisfactorily determined. We confess our inability to follow such an argument or to see in the evidence any reason for special assessment based upon the provisions of section 210 of the Revenue Act of 1917 or of section 327(a) or (c) of the Revenue Act of 1918. This leaves section 327(d) for our consideration as a possible basis for the petitioner's contention.
We were shown that for the year the petitioner had borrowed on notes and a mortgage in the average amount of $42,500, which amount was about 67 per cent of the average par value of capital stock outstanding and about 27.3 per cent of the average invested capital for the year. On authority of , an abnormal condition affecting capital is claimed. The facts clearly distinguish the two cases. We see no abnormality in the facts before us. 1928 BTA LEXIS 3280">*3283 .
The petitioner conducted its business in a rented building. In the taxable year it paid two officers $23,000 as compensation whereas in the following year it paid these same men $36,000. It sold supplies to the Iron City Engineering Co. at market prices without thereby incurring any selling expense. These facts are immaterial. The petitioner tried to show that its good will had grown and that its income during several years before the war was unusually small. But even if these facts were established the petitioner would not be entitled to the relief sought. We have carefully considered all of the evidence but have been unable to find any such abnormality as was intended to be the basis for special assessment. ; ; ; .