Coast Carton Co. v. Commissioner of Internal Revenue
Decision Date | 12 July 1945 |
Docket Number | No. 10859.,10859. |
Citation | 149 F.2d 739 |
Parties | COAST CARTON CO. v. COMMISSIONER OF INTERNAL REVENUE. |
Court | U.S. Court of Appeals — Ninth Circuit |
Meredith M. Daubin, of Washington, D. C., for petitioner.
Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key, Robert N. Anderson, Louise Foster, and Helen Goodner, Sp. Assts. to the Atty. Gen., for respondent.
Before GARRECHT, MATHEWS, and STEPHENS, Circuit Judges.
Petitioner asks us to review and reverse a decision of the United States Tax Court, which approved a deficiency found against it by the Collector of Internal Revenue for payment of income tax, excess profits tax and penalty for the tax year 1939.
Petitioner was incorporated under the laws of the State of Washington in 1904 for a period of twenty-five years, which time expired, and no extension of the charter has ever been granted. The business of the enterprise has, without exception, been conducted under the original corporate name, and the Tax Court agreed with the Collector of Internal Revenue that after expiration of the charter, the entity carrying the corporate name was in fact an association taxable as a corporation. The Coast Carton Company's tax return for the year in question was on corporate form, and deductions were taken for compensation paid J. L. Norie, Jr., Mrs. J. L. Norie, Jr., and Mary E. Banks, as officers of the company. Such compensation was found to have been fraudulently claimed, and penalty was assessed.
J. L. Norie claims that he is the sole owner of Coast Carton Company and that it is neither a corporation nor an association. J. L. Norie has owned stock in the corporation since 1916, becoming sole owner of all outstanding stock in 1924. This stock consisted of common par value equaling $29,300 and preferred par value $25,000. He transferred stock as follows: to his wife, Martha K. Norie, ten shares; to his son, J. L. Norie, Jr., eleven shares; and to his daughter, Mary E. Banks, ten shares. Although stock certificates were issued accordingly, they have remained in possession of J. L. Norie. No corporate or stockholders meetings have been held since 1926. In the summer of 1940 J. L. Norie was informed that the corporate charter had expired in 1929. Thereafter, J. L. Norie filed individual tax returns as to the company business. However, the business was continued under the corporate name; business was conducted and property was owned under the forms and practices of a corporation.
Martha K. Norie died in 1937. Her husband, J. L. Norie, acted as administrator, and the company stock which was issued in her name was inventoried. In 1928, J. L. Norie, Jr., an employee of the company, went east on company business. However, he abandoned such business and went to Spain, where he was killed in 1938, dying testate. The eleven shares of company stock were decreed to the widow, Esther Norie. The matter of payments to members of the Norie family is succinctly stated in the respondent's brief as follows:
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