120 F.2d 930 (4th Cir. 1941), 4776, Staunton Industrial Loan Corporation v. Commissioner of Internal Revenue

Docket Nº:4776.
Citation:120 F.2d 930
Case Date:June 10, 1941
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit

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120 F.2d 930 (4th Cir. 1941)




No. 4776.

United States Court of Appeals, Fourth Circuit.

June 10, 1941

C. G. Quesenbery, of Waynesboro, Va., and James Mann, of Norfolk, Va., for petitioner.

John J. Pringle, Jr., Sp. Asst. to Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen. and Sewall Key, Sp. Asst. to Atty. Gen., on the brief), for respondent.

Before SOPER, DOBIE, and NORTHCOTT, Circuit Judges.

DOBIE, Circuit Judge.

This is a petition to review the decision of the United States Board of Tax Appeals (hereinafter called the Board), wherein there was a redetermination of deficiencies in the income and excess profit taxes paid by the Staunton Industrial Loan Corporation (hereinafter called petitioner). See 42 B.T.A.No. 153 (Oct. 22, 1940).

Inasmuch as petitioner specifically states in its brief that no objection is made to the Board's findings of fact, we will adopt with

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but minor modifications the able summary of these facts found in the respondent's brief.

Petitioner is an industrial loan corporation, the purposes of which are set forth in its certificate of incorporation, and are, among other things, to carry on a general loan business and lend money to any person or firm to be repaid in periodical, weekly, monthly, or other installments, no loan to be made for a period longer than 10 years nor for a greater amount in the aggregate to any person than 20 per cent of the paid-in capital stock; to charge in advance a legal rate of interest upon the entire amount of the loan; to sell certificates of investment or similar obligations upon either the fully paid or partial payment system; to pay such rate of interest as may be fixed by its by-laws; to exercise all the general powers conferred by law upon corporations; to borrow money; to sell and dispose of bonds, notes and certificates of investments; to purchase and sell the capital stock and evidences of debt of other corporations; and to purchase or acquire shares of its own stock.

The petitioner accepts funds at interest from the public, including banks, and as evidence thereof issues certificates of investment or enters the amount in a passbook held by the customer, depending upon whether the amount is a final payment or an installment payment. The term 'certificate of Investment' appearing on the certificates was used to comply with statutes and regulations of Virginia governing industrial loan associations. Printed slips are used by customers to make deposits. The certificates of investment and passbooks used by petitioner contain notices of a right reserved by petitioner to require 30 and 60 days' notice, respectively, of withdrawal of funds. The petitioner does not accept checks drawn on accounts in other institutions and has no authority to accept deposits subject to check. Money paid to petitioner for the purchase of certificates of investment may be withdrawn at its place of business upon the presentation by the customer, properly executed, of a negotiable form of check furnished by petitioner for that purpose. These checks do not circulate like checks drawn on ordinary checking accounts, but if one of them, contrary to petitioner's regulations, is drawn by a customer payable to other than petitioner, it would be honored by the petitioner when presented by the endorsee at petitioner's place of business. Petitioner does not require its investors to present their passbooks when withdrawing funds from their accounts. Passbooks are used for the convenience of investors. Petitioner issues temporary receipts when amounts are deposited or withdrawn by an investor without his passbook. Such deposits and withdrawals are subsequently posted in the passbooks. The petitioner also accepts deposits in Christmas savings club accounts. Payments by petitioner of balances in the accounts are made by check. The rate of interest paid by petitioner on deposits is determined by its board of directors.

The petitioner makes loans to any one having acceptable credit or collateral. In 1936 it made several loans secured by its own stock. Loans are evidenced by printed forms of notes signed by the borrower. The petitioner does not have power to make loans for periods longer than 10 years. Borrowers at times repay loans by weekly, monthly, or semiannual installments. Petitioner imposes fines for defaults on loans. Its income is derived solely from loans. The business of petitioner consists of receiving investments and making loans and discounts.

The petitioner has never been short of cash and has always allowed withdrawals of funds without notice.

The words 'Investment Department' appear on the face of petitioner's passbooks, which contain rules and regulations subject to which investments are received by petitioner. Pursuant to the statutes of Virginia and regulations governing industrial loan associations, the holder of the books is referred to in the rules and regulations as...

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