DocketNumber: Docket No. 4024-63
Citation Numbers: 43 T.C. 888, 1965 U.S. Tax Ct. LEXIS 112
Judges: Black
Filed Date: 3/24/1965
Status: Precedential
Modified Date: 1/13/2023
*112
Under the facts of the instant case petitioner was required by
*113 *888 OPINION
Petitioner is a corporation which became a member of an affiliated group of corporations on May 1, 1959. Petitioner had previously filed its income tax returns on a calendar year basis. The affiliated group of corporations filed a consolidated return for the fiscal year ended April 30, 1960, in 1960. Pursuant to
The Commissioner has determined that under the provisions of
The only issue for determination is whether
A stipulation of facts, together with several exhibits attached thereto, was filed at the hearing and is incorporated herein by this reference. The following is a summary of the facts stipulated:
Petitioner corporation, incorporated under the laws of the Commonwealth of Pennsylvania, filed a short-period return, January 1 to April 30, 1959, with the district director of internal revenue at Philadelphia, Pa. Petitioner's income tax return for 1958 was filed on a calendar year basis.
South Village Properties, Inc., hereinafter sometimes referred to as South Village, a corporation incorporated under the laws of the Commonwealth of Pennsylvania, owned 79 percent of petitioner's outstanding stock and it acquired the remaining 21 percent of petitioner's outstanding stock on May 1, 1959. South Village's income tax return in 1959 was filed on a fiscal year basis ending April 30. A consolidated return was filed by South Village, petitioner, and other subsidiaries *889 for the taxable year ended April 30, 1960, as well as an election by petitioner to so file attached to said consolidated return.
Petitioner filed a*115 request to change its annual accounting period from a calendar year to a fiscal year basis ending April 30 as required by appropriate regulations promulgated under the consolidated return section of the 1954 Code.
There is no dispute between the parties that the income tax return of petitioner for the short period, January 1 to April 30, 1959, correctly reported petitioner's income for that period and that it paid the tax thereon. The Commissioner, however, in his determination of the deficiency has held that petitioner should have annualized its income for such short period and that such annualization results in an increased income and he has determined a deficiency of $ 3,284.87 based on such increased income.
Petitioner argues that
(a)
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(g)
Respondent relies on
(a) Returns for Short Period. -- A return for a period of less than 12 months (referred to in this section as "short period") shall be made under any of the following circumstances: (1) Change of annual accounting period. -- When the taxpayer, with the approval of the Secretary or his delegate, changes his annual accounting period. In such a case, the return shall be made for the short period beginning on the day after the close of the former taxable year and ending at the close of the day before the day designated as the first day of the new taxable*117 year.
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(b) Computation of Tax on Change of Annual Accounting Period. -- (1) General rule. -- If a return is made under paragraph (1) of subsection (a), the taxable income for the short period shall be placed on an annual basis by multiplying such income by 12 and dividing the result by the number of months in the short period. The tax shall be the same part of the tax computed on the annual basis as the number of months in the short period is of 12 months.
*890 We think that under the facts of this case petitioner should be sustained. It seems clear to us that
It is, of course, true that there are circumstances, where a taxpayer has sought to change its accounting period without respect to the question of affiliation from a calendar year basis to a fiscal year basis, that annualization of income will be required. For example, if petitioner, without regard to the question of a consolidated return filed by affiliated corporations, *118 had requested under
In reaching our conclusion above stated, we have considered
For the reasons which we have stated in our report we do not believe