185 F.2d 55 (4th Cir. 1950), 6135, Mims Hotel Corp. v. C. I. R.

Docket Nº:6135.
Citation:185 F.2d 55
Party Name:MIMS HOTEL CORP. v. COMMISSIONER OF INTERNAL REVENUE.
Case Date:November 08, 1950
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit
 
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Page 55

185 F.2d 55 (4th Cir. 1950)

MIMS HOTEL CORP.

v.

COMMISSIONER OF INTERNAL REVENUE.

No. 6135.

United States Court of Appeals, Fourth Circuit.

November 8, 1950

         Argued Oct. 12, 1950.

Page 56

         Richard G. Herndon, Wheeling, W. Va., for petitioner.

         Hilbert P. Zarky, Sp. Asst. to the Atty. Gen. (Theron Lamar Caudle, Asst. Atty. Gen. and Ellis N. Slack, Sp. Asst. to the Atty. Gen. on brief), for respondent.

         Before PARKER, Chief Judge, and SOPER, Circuit Judge, and TIMMERMAN, District Judge.

         PARKER, Chief Judge.

         This is an appeal from the Tax Court in a case involving the proceeds of a life insurance policy on an officer of a corporation. The policy had been taken out and assigned to secure a loan to the corporation made by the insurance company; and upon the death of the officer the face of the policy was credited on the loan. The corporation, which was the taxpayer, contended that the proceeds of the policy should be included in its equity invested or equity borrowed capital and that its excess profits tax for the year in question be reduced accordingly. The Tax Court held the policy to be an asset of the corporation and refused to include its proceeds in equity invested or equity borrowed capital. 13 T.C. 901. We think that this was clearly correct.

         The facts are fully stated in the opinion of the Tax Court and need not be repeated here. They may be summarized briefly as follows: Taxpayer is a Virginia corporation organized in the year 1930 by two brothers, John W. and Ralph E. Mims, to build and operate the Mimslyn tourist hotel at Luray, Virginia. These brothers were the principal stockholders of the corporation and each held 500 shares of its capital stock of the par value of $100 per share, for which they paid $25, 000 in cash and transferred property valued at $75, 000. The remaining stock of the corporation consisted of 127 shares distributed among 20 persons. Pursuant to an understanding reached prior to the issuance of the stock, the corporation procured a loan from the Shenandoah Life Insurance Company of $150, 000, later increased to $165, 000, with which to erect a hotel, and secured same by a mortgage on its property and the assignment of two policies of life insurance in the sum of $50, 000 each on the lives of John W. And Ralph E. Mims.

         The policies of life insurance had been taken out upon the requirement of the life...

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