Lewyt Corp. v. Comm'r of Internal Revenue
| Decision Date | 30 September 1952 |
| Docket Number | Docket No. 28151. |
| Citation | 18 T.C. 1245 |
| Parties | LEWYT CORPORATION, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Held, the phrase ‘paid or accrued‘ as used in section 122(d)(6) of the Internal Revenue Code has reference to the system of accounting used by the taxpayer; held, further, amounts tendered to the collector in 1947 by taxpayer as payment of additional excess profits taxes for 1943, 1944, and 1945 were not deductible in 1947. Fred R. Tansill, Esq., and Eugene Meacham, Esq., for the petitioner.
Ellyne E. Strickland, Esq., for the respondent.
The taxpayer contests the following deficiencies determined by the Commissioner:
+-----------------------------------------------+
¦Taxable year ended: ¦Tax ¦Amount ¦
+---------------------+--------------+----------¦
¦Sept. 30, 1944 ¦Income ¦$7,129.21 ¦
+---------------------+--------------+----------¦
¦Sept. 30, 1945 ¦Excess profits¦428,288.05¦
+-----------------------------------------------+
The fiscal years ended September 30, 1946, and September 30, 1947, also are involved because of net operating losses sustained in those years which taxpayer contends were not properly computed before being carried back to the taxable years. The Commissioner has asked an increased deficiency for the fiscal year ended September 30, 1945, based on what he now alleges was his improper allowance of a deduction of $55,940.04 claimed as interest on taxes paid during the fiscal year ended September 30, 1947. (References hereinafter to fiscal or taxable years are to the fiscal or taxable years of petitioner ending September 30 in the year or years mentioned.)
The following questions are presented for decision:
1. May excess profits taxes for 1945 which were paid in a stipulated amount within the fiscal year 1946 and excess profits taxes for 1943, 1944, and 1945 which were paid in stipulated amounts within the fiscal year 1947, be added to the agreed net operating losses for the fiscal years 1946 and 1947 in computing the net operating loss carry-backs to the taxable years under the provisions of section 122(d)(6)?
2. Did certain amounts tendered by taxpayer to the collector of internal revenue on September 29, 1947, constitute payments of additional excess profits taxes for the fiscal years 1943, 1944, and 1945, within the fiscal year 1947?
3. Is taxpayer entitled to a deduction of $55,949.04 as interest paid or accrued during the fiscal year 1947?
4. May the amount of excess profits tax paid or accrued within the taxable year 1944 be used to reduce the net income for said year in computing the net operating loss carry-back from the fiscal year 1946 to the fiscal year 1945 under the provisions of section 122(b)(1)(A)(i)?
Some of the facts have been stipulated and are found accordingly.
Petitioner is a New York corporation, formed in 1942, engaged in the manufacture of vacuum cleaners and electronic devices. Its income and excess profits tax returns for the years involved were filed on the accrual method using a fiscal year ending each September 30, with the collector for the third district of New York.
For the fiscal years 1946 and 1947 petitioner incurred net operating losses of $164,326.38 and $786,383.25, respectively, not including any additions under section 122(d)(6).
During the fiscal year 1944 petitioner paid a total of $759,916.50 in excess profits tax which payments were made on petitioner's excess profits tax liability for the fiscal year 1943.
During the fiscal year 1945 petitioner paid a total of $510,939.23 on its excess profits tax liability for fiscal 1944.
Respondent determined petitioner's excess profits tax liability for fiscal 1944 to be $280,540.33 and its net income for the same year to be $420,540.43.
Petitioner's net operating losses for the fiscal years 1946 and 1947 in the respective amounts of $164,326.38 and $786,383.25 were allowable as carry-back deductions in the fiscal years 1944 and 1945 and were so allowed by respondent.
Petitioner paid the excess profits tax liability shown on its return for the fiscal year 1945 during the fiscal year 1946 in the total amount of $861,118.04.
With reference to the fiscal year 1943 a dispute arose between petitioner and respondent. The major issue centered on whether the value of certain unfilled customers' orders and contracts which petitioner received by assignment from shareholders in two predecessor corporations were amortizable by petitioner and said amortization properly reflected as a deduction in cost of goods sold. Respondent by statutory notice dated August 30, 1946, asserted deficiencies against petitioner for the fiscal year 1943 of $7,757.49 in income tax and $194,992.51 in excess profits tax. These deficiencies were contested in a petition filed in this Court bearing docket No. 12526 on November 19, 1946. One of the errors assigned therein was the disallowance of the above-described item. This question was placed in issue by respondent's answer filed December 23, 1946.
Petitioner's auditor was a certified public accountant experienced and qualified to act in tax matters. Both before and after the above proceeding was at issue attempts were made to settle the case. Conferences beginning about October 23, 1946, were held attended by the auditor and technical staff advisers. Petitioner's lawyers were present at some of the conferences. One such conference was held on September 26, 1947, and as a result the auditor believed that a basis for settlement had been arrived at for computing the additional tax due for the fiscal year 1943. On that basis the auditor recomputed the petitioner's tax liability and on September 29, 1947, petitioner addressed a letter to the collector transmitting petitioner's check payable to the collector for $190,002.16 and indicating it was for additional tax for fiscal 1943 in the amount of $154,473.30 and interest of $35,528.86. The letter bears a stamp showing receipt by a cashier in the collector's office for the third district of New York on September 29, 1947. The amount of this check was placed on September 29, 1947, in a suspense account maintained by the collector.
Subsequent conferences about the settlement of the above case were held down to and including October 30, 1947. On November 6, 1947, the Head of the Technical Staff, New York Division, advised Division Counsel that settlement efforts on a satisfactory basis had proved ineffectual and defense of the case was recommended. On December 12, 1947, a written proposal of settlement was submitted by petitioner's attorney which the Technical Staff recommended on February 20, 1948, be accepted. A stipulation of settlement signed by the parties was filed with this Court on February 24, 1948. The stipulation showed that petitioner's excess profits tax liability for the taxable year 1943 was $140,147.87 and that petitioner had paid excess profits taxes on September 29, 1947, in the amount of $141,618.13, an overpayment of $1,470.26. This Court entered its decision to that effect on March 3, 1948. The amount of $141,618.13 was part of the $190,002.16 received by the collector on September 29, 1947, deposited in the above-mentioned suspense account.
Prior to September 30, 1947, and during that year a revenue agent was examining petitioner's returns for the years 1944, 1945, and 1946. This examination was expanded to include 1947. The amortization issue involved for the year 1943 was also present in 1944 and its disposition would affect the tax liability for 1945. Petitioner's auditor was in consultation with the agent and was advised of other proposed adjustments. The agent's report was dated July 26, 1948, and was forwarded to petitioner under date of August 25, 1948. Following the conference of September 26, 1947, referred to above, petitioner's auditor recomputed petitioner's tax liabilities for 1944 and 1945 on his understanding of the basis for settlement of the amortization question and giving effect to the other proposed adjustments mentioned to him by the agent.
On September 29, 1947, petitioner addressed a second letter to the collector transmitting petitioner's check payable to the collector in the amount of $178,810.92. The body of the letter stated:
This sum was received by the collector on September 29, 1947, and placed in the same suspense account with the $190,002.16.
Petitioner charged the following amounts as taxes against earned surplus account in its books as of September 30, 1947:
+----------------------------------------------------+
¦For the Fiscal Year Ended Sept. 30, 1943¦$154,473.30¦
+----------------------------------------+-----------¦
¦For the Fiscal Year Ended Sept. 30, 1944¦49,953.38 ¦
+----------------------------------------+-----------¦
¦For...To continue reading
Request your trial
-
Budd Company v. United States
... ... refund claim (see Section 322(b) (2) (A) of the Internal" Revenue Code of 1939, as amended to August 1951, 26 U.S.C. \xC2" ... , after examination of the record and the briefs in Lewyt Corp. v. Commissioner, 1955, 349 U.S. 237, 75 S.Ct. 736, 99 ... ...
-
Dowell v. Commissioner
...has been made is one drawn from Rosenman v. United States, supra. See, e.g. Fortugno v. Commissioner, supra; Lewyt Corp. v. Commissioner Dec. 19,225, 18 T.C. 1245 (1952), affd. 54-2 USTC ¶ 9496 215 F. 2d 518 (2d Cir. The Supreme Court, in Rosenman, held that a taxpayer's remittance which is......
-
Diamond a Cattle Co. v. Comm'r of Internal Revenue
...the years of payment, in holding that Federal taxes accrued in the tax year and were not deductible in the next year when paid, Lewyt Corporation, 18 T.C. 1245, contra Olympic Radio & Television, Inc. v. United States, 108 F.Supp. 109, sustained on rehearing 110 F.Supp. 600, and in holding ......
-
Lewyt Corporation v. Commissioner of Internal Revenue
...account of its 1945 excess profits tax liability. The Commissioner disallowed the deduction and the Tax Court sustained the Commissioner. 18 T.C. 1245. The Court of Appeals affirmed. 215 F.2d 518. The case is here on a petition for certiorari which we granted, 348 U.S. 895, 75 S.Ct. 217, to......