Associated Furniture Corporation v. United States

• Decision Date: 20 October 1930
• Docket Number: No. J-350.,J-350.
• Citation: 44 F.2d 78
• Parties: ASSOCIATED FURNITURE CORPORATION v. UNITED STATES.
• Court: U.S. Claims Court

44 F.2d 78 (1930)

ASSOCIATED FURNITURE CORPORATION v. UNITED STATES.

No. J-350.

Court of Claims.

October 20, 1930.

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COPYRIGHT MATERIAL OMITTED

Thomas G. Haight, of Jersey City, N. J. (Robert H. Montgomery and J. Marvin Haynes, both of Washington, D. C., and James O. Wynn, Jr., and Roswell Magill, both of New York City, on the brief), for plaintiff.

Arthur J. Iles, of Indianapolis, Ind., and Charles B. Rugg, Asst. Atty. Gen., for the United States.

Argued before BOOTH, Chief Justice, and WILLIAMS, WHALEY, LITTLETON, and GREEN, Judges.

WILLIAMS, Judge.

This is a suit to recover the sum of $4,089, with interest, which amount was on July 10, 1927, paid by the plaintiff to the collector of internal revenue at Wilmington, Del., as a special excise tax with respect to the carrying on or doing business for the fiscal year beginning July 1, 1925.

The challenged tax was assessed and collected under authority of section 700 of the Revenue Act of 1924 (43 Stat. 325), the relevant part of which reads as follows:

"(a) On and after July 1, 1924, in lieu of the tax imposed by section 1000 of the Revenue Act of 1921 —

"(1) Every domestic corporation shall pay annually a special excise tax with respect to carrying on or doing business, equivalent to $1 for each $1,000 of so much of the fair average value of its capital stock for the preceding year ending June 30 as is in excess of $5,000. In estimating the value of capital stock the surplus and undivided profits shall be included. * * *"

The purpose of the organization and incorporation of the plaintiff was to do the following things: "The manufacturing, buying, and selling, or otherwise dealing or trading in furniture, fixtures, furnishings, and other kinds of goods, wares, and merchandise; the acquisition of the good will, business, stock, assets, etc., of any person, firm, or association, or corporation doing business of a character similar to that of the plaintiff; the acquisition, ownership, and disposal of the shares of stock or voting trust certificates, participation certificates, or other certificates issued in respect of the shares of stock of any class of other corporations or associations; the issuance of its own stock of any class, notes, bonds, or other obligations in payment or exchange for any stock or interest therein, or any notes, bonds, or other securities or contracts of any character; the purchase, ownership, and operation of real estate, improved or unimproved," etc.

It is not contended that the plaintiff was not engaged in carrying on or doing business during the fiscal year beginning July 1, 1925, and ending July 30, 1926, but that it was not so engaged during the preceding year ending June 30, 1925.

It is contended that plaintiff's activities between its incorporation, June 2, 1925, and July 1, 1925, were confined to its organization meeting on June 2d and the meeting of its board of directors on June 15th, and that nothing was done at these meetings other than such routine acts as were necessary to the completing of its corporation organization.

If the plaintiff prior to July 1, 1925, did nothing further than perform such acts as were necessary to complete its corporate organization, it is not subject to the tax imposed for the year beginning July 1, 1925, as subsection (b) of section 700 of the 1924 act provides: "The taxes imposed by this section shall not apply in any year to any corporation which was not engaged in business * * * during the preceding year ending June 30. * * *"

It is not required that a corporation, in order to be liable for the tax, should have been engaged in business the whole of the preceding year, article 28, of Regulations No. 64, providing: "* * * If it was in business even one day of the preceding year and one day of the taxable year it is subject to the tax."

The regulations (article 12) further provide: "* * * No particular amount of business is required to bring a company within the terms of the act."

The decided cases also lay down the same rule. Morrisdale Land Company v. United States, 66 Ct. Cl. 701; Edgar Estates Corporation v. United States, 65 Ct. Cl. 415; Chevrolet Motor Company v. United States, 64 Ct. Cl. 211.

The various activities of the plaintiff are stated in detail in the findings of fact, and it is not necessary to repeat them here. Findings 3 and 4 have to do with the activities of the plaintiff prior to July 1, 1925, and findings 5 and 10, with its transactions and acts subsequent to that date.

Plaintiff's activities subsequent to July 1, 1925, are material only in so far as they may be related to, or are component parts of, its activities during the preceding year, and throw light on whether or not such activities constitute the carrying on or doing business.

Do the acts performed by the plaintiff between the date of its incorporation June 2, 1925, to July 1, 1925, constitute the carrying on or doing business, or were they, as the plaintiff contends, nothing more than formal routine acts necessary to the completing of its corporate organization?

Article 12 of the regulations provides: "A corporation may complete its organization and sell its capital stock for cash without incurring liability, but other activities, such as entering into contracts for the purchase of property or construction of a...