Brownsville Coal & Coke Co. v. Heiner, 5664.
| Decision Date | 22 January 1930 |
| Docket Number | No. 5664.,5664. |
| Citation | 38 F.2d 248 |
| Parties | BROWNSVILLE COAL & COKE CO. v. HEINER, Collector of Internal Revenue. |
| Court | U.S. District Court — Western District of Pennsylvania |
Smith, Shaw & McClay, of Pittsburgh, Pa., for plaintiff.
John D. Meyer, Wm. J. Aiken, and Jno. A. McCann, all of Pittsburgh, Pa., for defendant.
This is an action against the defendant, collector of internal revenue, to recover corporation income and excess-profits taxes and interest in the sum of $6,898.70, alleged to have been erroneously and illegally collected from the plaintiff for the taxable year 1917. A jury trial was waived, and the case was heard before the court on the pleadings and proofs. From these we find the following facts:
The People's Coal Company and the Snowdon Coke Company were affiliated corporations during the taxable year 1917. During all that period the People's Coal Company owned all the capital stock of the Snowdon Coal Company except 2.8 per cent. thereof owned by one Isaac Taylor. The People's Coal Company was organized in 1901 and had acquired a large acreage of coal lands in the vicinity of Brownsville, Pa. In October of 1913 that company caused the incorporation of the Snowdon Coke Company and conveyed to the Snowdon Coke Company all of its coal lands in consideration of receiving all of the stock of the Snowdon Coke Company, of which stock it conveyed 2.8 per cent. to Isaac Taylor. During the year 1917 the two companies had the same directors with the exception of one person, W. T. McKnight, who was a director of the Snowdon Company and not of the People's Coal Company. The same persons, in one capacity or another, who were common directors in both companies, served as officers of the two companies. The main offices of both companies in the taxable year were located in the same rooms in the Conestoga Building, Pittsburgh. The office help carrying on the business of both companies consisted of an auditor, bookkeeper, stenographer, telephone operator, were employed and paid by the People's Coal Company; the books and records of both companies were kept by these employees. The raw materials and supplies for the Snowdon Company were purchased, all of its sales were made, all of its accounts were collected, through this Pittsburgh office. During the year 1917 the salaries and expenses of the Pittsburgh office amounted to $12,995.54, and were paid entirely out of the funds of the People's Coal Company. That company also employed men to trace loaded and empty cars from the plant of the Snowdon Company, paid their salaries, and the salaries of the plant engineer, Steele, of the Snowdon Company. The People's Coal Company's income in 1917 was derived chiefly from securities owned by it in the Snowdon Company. It did not mine coal, had sold all of its coal acreage to the Snowdon Company; and the Snowdon Company was mining coal, manufacturing it into coke, and selling it. On March 30, 1918, the Snowdon Company filed its corporation income tax return for the calendar year 1917, on the basis of which return a tax in the sum of $155,699.19 was assessed and paid. The People's Coal Company likewise filed its income and profits tax return for the year 1918.
On September 1, 1920, the Commissioner of Internal Revenue notified the People's Company that from the facts presented, it appeared that that company was affiliated with the Snowdon Company during the taxable year 1917, and requested a consolidated excess-profits tax return involving the two companies to be filed for the calendar year 1917. This return was filed, with the result that thereafter the Commissioner of Internal Revenue determined that the two corporations were not affiliated, and then later determined that the Snowdon Company should pay an additional sum of $125,417.02 as a part of its tax for the calendar year 1917. This amount was duly assessed on the Commissioner's list for 1921. A claim for abatement dated June 1, 1921, for this amount was filed by the Snowdon Company. This claim was allowed for $119,457.31, and rejected for $5,959.71, which was paid by the plaintiff along with interest thereon in the sum of $938.99, making a total amount of $6,898.70, for which a claim for refundment was duly filed by the Snowdon Company before this suit was brought. The Snowdon Company was notified by letter of August 21, 1926, that its claim for refundment would be rejected, because the Snowdon Company was not affiliated with the People's Company.
In 1927, under authority of the Pennsylvania statutes, the plaintiff purchased all the assets, franchises, and property, real, personal, and mixed, of the Snowdon; and the corporate assets, franchises, and property, real, personal, and mixed, of the two corporations, were merged under authority of the said Pennsylvania statutes. Thereafter, by proper corporate proceedings, the People's Company changed its name to the Brownsville Coal & Coke Company, the name in which this suit is brought.
From these facts, we conclude as a matter of law that the People's Coal Company and the Snowdon Coke Company were affiliated companies within the meaning of the statutes with reference to the filing of consolidated return, and that for the taxable year 1917 the two corporations were entitled to file consolidated returns.
We further find that from said consolidated returns the defendant erroneously and illegally collected from the plaintiff's predecessor, the Snowdon Company, excess-profits tax in the sum of $4,208.33, for which amount judgment should be rendered for the plaintiff, with interest. An order for judgment may be submitted accordingly.
Discussion.
The facts of this case present for discussion two questions:
(1) Were the two companies, People's Coal Company and Snowdon Coke Company, affiliated companies during the taxable year 1917 under the regulations and statutes.
(2) What is the correct method of computing excess-profits tax under the regulations on a consolidated return.
On the first proposition, the Taxing Act of 1917 (40 Stat. 300), was silent in regard to consolidated and affiliated returns; but the Commissioner, under authority granted him to make reasonable rules and regulations for the enforcement of that act, provided in article 77 of Regulation 41, as amended by Treasury Decisions 3389, as follows:
To continue reading
Request your trial
-
Morrisdale Coal Co. v. Commissioner of Internal Rev.
...certiorari denied 280 U.S. 560, 50 S.Ct. 18, 74 L.Ed. 615; Nowland Realty Co. v. Commissioner, 7 Cir., 47 F.2d 1018; Brownsville Coal & Coke Co. v. Heiner, D.C., 38 F.2d 248. We concur in the ruling of the Board of Tax (2), (3), (4) and (5) As to the Value for Tax Purposes of Coal, Building......