J. & O. Altschul Tobacco Co. v. Commissioner of Int. Rev.
| Decision Date | 28 July 1930 |
| Docket Number | No. 5819.,5819. |
| Citation | 42 F.2d 609 |
| Parties | J. & O. ALTSCHUL TOBACCO CO. v. COMMISSIONER OF INTERNAL REVENUE. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Earl W. Shinn, of Washington, D. C. (H. B. McCawley, of Washington, D. C., on the brief), for petitioner.
G. A. Youngquist, Asst. Atty. Gen., J. Louis Monarch, John G. Remey, and Morton K. Rothschild, Sp. Assts. to Atty. Gen., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, of Washington, D. C., for respondent.
Before BRYAN and FOSTER, Circuit Judges, and GRUBB, District Judge.
The Commissioner of Internal Revenue determined deficiencies of income and profits taxes of petitioner for the fiscal years ending August 31, 1917 and 1918, respectively, of $1,388.99 and $2,044.00. The petitioner disputed this and also claimed refunds for the said years respectively of $2,251.12 and $1,355.32, and appealed to the Board of Tax Appeals.
The petitioner contended that it should be classed as a corporation having no invested capital or only nominal capital for the fiscal year ending August 31, 1917, and for that part of its fiscal year of 1918 from August 31, 1917, up to January 1, 1918, under the provisions of section 209 of the Revenue Act of 1917. And that it should be classed as a personal service corporation from January 1, 1918, to August 31, 1918, under the provisions of section 200 and 231 of the Revenue Act of 1918 (40 Stat. 1058, 1076). The board held against these contentions and this appeal followed.
There is no dispute as to the facts found by the board. Stated briefly, those material to a decision are as follows.
Petitioner is a New York corporation with its principal office in Quincy, Fla. It was organized in 1910 by Oscar Altschul, his father, Joseph Altschul, and Lyman Baum, who held respectively 60, 30, and 10 per cent. of its total authorized capital, amounting to $5,000. At the time petitioner was organized the Altschuls were in bankruptcy, and in return for the stock issued to them they assigned to the petitioner certain contracts which they held for the packing and sale of tobacco and some 5,000 pounds of tobacco, for the stock. This tobacco at that time was worth approximately $1.65 a pound. Baum received his stock for services in organizing the corporation. The business consisted of the curing, packing, storing, and sale of tobacco for the account of the growers. For this service the growers were charged 5 cents per pound and 10 per cent. of the gross selling price. When the tobacco was delivered to petitioner, about 1½ cents per pound was paid by the farmers, and as the treatment of the tobacco progressed the farmer was called upon to pay further installments of the packing charge until 5 cents per pound had been paid. Petitioner rented a warehouse at an annual rental of $1,000. The only appliances necessary in treating the tobacco were bulk platforms, bins, and chopping boards. Petitioner sold the tobacco when cured for the account of the farmers. The sales were made in the name of petitioner, charged to the purchaser, and credited to the individual farmers. Collections were made by the petitioner and transmitted to the farmers. If a loss occurred it was charged to the individual farmer whose tobacco had been sold. Oscar Altschul was an expert in the curing and packing of tobacco and he superintended that part of the business. Joseph Altschul assisted in this to some extent and also gave his services in making sales. Baum resided in New York and attended to incidental business that might occur there and also at times made sales. There were no other stockholders. In 1911 Oscar Altschul became a partner with Lee Munroe in the operation of a tobacco farm known as the Altschul Farm. He had no ownership in the real estate. Oscar Altschul attended to the curing and packing of tobacco raised on the farm. These duties were turned over to petitioner some time after the farm was acquired. Petitioner rendered its services to the Altschul Farm at cost and agreed that one-half of the profits were to be paid petitioner in lieu of the customary commissions. The petitioner did not finance the packing of the Altschul Farm crop, but drew on the operators of that farm for such purposes. One-half of the profits of this farm was treated as income of petitioner on its books, but it was in...
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