APPEAL OF UVALDE COMPANY

• Decision Date: 06 April 1925
• Docket Number: Docket No. 572.
• Citation: 1 BTA 932
• Parties: Appeal of UVALDE COMPANY.
• Court: U.S. Board of Tax Appeals

1 B.T.A. 932 (1925)

Appeal of UVALDE COMPANY.

Docket No. 572.

Board of Tax Appeals.

Submitted February 16, 1925.

Decided April 6, 1925.

H. A. Mihills, C. P. A., for the taxpayer.

J. D. Foley, Esq., for the Commissioner.

Before GRAUPNER, LANSDON, LITTLETON, and SMITH.

This is an appeal from a determination by the Commissioner proposing the assessment of additional income and profits taxes for the fiscal year ended June 30, 1921, in the amount of $37,670.34, as outlined in the deficiency letter mailed to the taxpayer on September 19, 1924.

FINDINGS OF FACT.

Taxpayer is a Texas corporation organized in June, 1920, and was engaged during the taxable year in the business of constructing rock asphalt street pavements. It had no predecessor, and in September, 1921, after completing certain paving work during the fiscal period ending June 30, 1921, sold all of its assets to another paving company, and remained inactive until September, 1923, when activities were resumed.

During the fiscal year ending June 30, 1921, taxpayer constructed certain street pavements under contracts with the city of San Antonio; all income received for the taxable year being from contracts with that city obtained on competitive bids. All bids were required to be made and all contracts entered into were on the basis of paving construction with maintenance and without maintenance. All contracts entered into by taxpayer from which its income during the taxable year was received contained provisions for maintenance. The pavements specified in the contracts represented several classes of construction. The specifications adopted by the city usually required a combination of a 1-inch asphalt surface on the cheaper built streets, viz., gravel or macadam base; a 2-inch asphalt surface on a macadam base in certain residential districts; and a 3-inch asphalt surface with a concrete base on business or semi-business streets. Three typical contracts were introduced in evidence each containing the same provisions respecting construction and payment, and containing, respectively, maintenance periods of three, five and ten years. The contracts provided that the construction work specified therein should be completed within 90 days, as follows:

Contractor will prosecute the work with such force and in such manner and order and at such times, places and seasons, all as may be directed by the Engineer; and he will carry the work to full completion on his part and tender the same to City for acceptance before the expiration of 90 (ninety) consecutive working days. * * *.

In case Contractor shall fail to complete the work under this contract to the satisfaction of Engineer within the time limited and allowed as aforesaid, then by reason of the fact that time is an essential element of this contract, it is agreed that the Contractor shall and will pay to the City the sum of Twenty ($20.00) Dollars for each and every day by which the time consumed in such performance and completion may exceed the time allowed for that purpose, * * *. (Italics ours.)

All contracts were completed during the taxable year within the time required to the satisfaction of, and were accepted by, the city of San Antonio. The contracts provided for payment for work completed, as follows:

Contractor shall not be entitled to demand or to receive payment of any sum in excess of the amount to be paid upon such monthly estimates, unless and until said work and improvement shall be entirely completed in the manner set forth in this contract and the specifications and drawings therefor, and such completion duly certified by the Engineer; and also unless and until each and every one of the stipulations of this contract to be performed prior to the completion of the original construction of the work are complied with and the work fully completed to the satisfaction of the Mayor, all of which shall be evidenced by the final certificate to be dated and signed by the Engineer certifying to the completion of the work and the acceptance thereof by City, and the approval of such certificate by the signature of the Mayor. Within thirty days after the date of such final certificate, the Engineer shall prepare his final estimate as the basis for the settlement upon the considerations and account of this contract, whereupon City will pay and deliver to Contractor the several considerations, cash payments and assessment certificates all as provided in and subject to all the provisions of this contract and the procedure ordinance of the City, * * *.

The action of the Engineer by which Contractor is to be bound and concluded according to the terms of this contract, shall be that evidenced by the final certificate of the Engineer.

Upon the completion of the work specified in any contract and the acceptance by its engineer, the city, in accordance with the terms of the contract, paid to the taxpayer in cash one-third of the contract price in full settlement of its proportion of the cost of the work, at the same time executing and delivering to the contractor negotiable assessment certificates as authorized by law against abutting property owners for the remaining two-thirds of the contract price. The assessments bore interest at 7 per cent and were payable in six annual installments. These certificates, which constituted a lien by state statute against the property of the persons named therein, were as follows:

Paving Certificate Coupon Number ONE Principal Due Hereon No. 8827

$60.48

WHEREAS THE CITY OF SAN ANTONIO, TEXAS, has issued a certain paving certificate against certain property abutting on QUEEN ANNE COURT Street, in said City, also against TOM B. PAPAS the owner of such property, such certificate being for the total principal sum of THREE HUNDRED SIXTY TWO & 68/100 $362.68 Dollars, payable in six equal installments, together with interest thereon at the rate of seven (7) per cent per annum from and after the 12th day of MAY, 1921 until paid; the first five of said installments being evidenced by coupons attached to said certificate; and at the maturity date of each successive installment, and as a part thereof, all interest accrued to such date shall be paid both on such maturing installment and also on all unmatured installments.

THIS COUPON CERTIFIES that THIRTY DAYS from and after said date above mentioned upon surrender hereof receipted in full and subject to the terms of said certificate THE UVALDE COMPANY or the BEARER hereof, is entitled to receive from said owner the FIRST installment of said principal in the sum of SIXTY & 48/100 Dollars, together with all accrued interest as herein stated; but the principal of this coupon may be paid at any time before maturity, with interest thereon to the date of such payment, leaving interest on unpaid principal to be paid at the maturity date hereof.

IN WITNESS WHEREOF, said City has caused this coupon to be executed, this 12th day of MAY, A. D. 1921

CITY OF SAN ANTONIO. O. B. BLACK, Mayor. ATTEST BEN A. CORDELL, City Clerk.

The...