Brooks v. Commissioner of Internal Revenue
| Decision Date | 15 October 1929 |
| Docket Number | No. 2860.,2860. |
| Citation | 35 F.2d 178 |
| Parties | BROOKS v. COMMISSIONER OF INTERNAL REVENUE. |
| Court | U.S. Court of Appeals — Fourth Circuit |
John H. Small, of Washington, D. C., for petitioner.
Randolph C. Shaw, Sp. Asst. Atty. Gen. (Mabel Walker Willebrandt, Asst. Atty. Gen., Sewall Key, Sp. Asst. Atty. Gen., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and Prew Savoy, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., on the brief), for respondent.
Before PARKER and NORTHCOTT, Circuit Judges, and GRONER, District Judge.
Petitioner is a resident of Maryland, and owned about 75 per cent. of the capital stock of the Sanford & Brooks Company, a corporation. There were seven or eight other stockholders, consisting of young men in the office of the company and a daughter of the petitioner. At a meeting of the stockholders of the company on March 11, 1919, an 8 per cent. dividend was declared on the capital stock, and $12,800, the amount to which petitioner was entitled, was credited to him on the company's books. It was, however, agreed among the stockholders present at this meeting that the dividends should not be paid until the corporation was in funds which it could spare for that purpose. All the stockholders, except the petitioner, were paid this dividend, in the year 1919.
On February 25, 1920, at an annual meeting of the stockholders of the company, another 8 per cent. dividend was declared and credited to the stockholders on the books of the company. $12,640, the amount of petitioner's dividends, was again credited to him on the books. The same agreement was had. Again all the minority stockholders were paid their dividends in 1920. The petitioner was not paid.
Again at the stockholders' meeting on March 11, 1921, another 8 per cent. was declared and credited to the stockholders. The same agreement was had. Again all the minority stockholders were paid the full amount of their dividends in 1921, and the petitioner was paid on account, the sum of $4,287.91.
The minority stockholders were paid their dividends for the years 1919, 1920, and 1921, while the entire amount of petitioner's dividends, for the years 1919 and 1920, and part of the amount for the year 1921, were left unpaid; that is, all other stockholders were paid the entire amount of their dividends for the year 1921, while the dividends declared the petitioner for the year 1919 remained wholly unpaid.
The Commissioner of Internal Revenue, the respondent, determined that these dividends were income to the petitioner for years 1919, 1920, and 1921, from which determination the petitioner appealed to the Board of Tax Appeals, on the ground that these dividends were not properly chargeable to the petitioner as income for the years in question. The respondent filed an answer before the Board of Tax Appeals, in which it was alleged that the surplus of the Sanford & Brooks Corporation on December 31, 1918, was $67,673.57, on December 31, 1919, was $97,818.67, on December 31, 1920, was $94,652.83, and on December 31, 1921, was $252,235.81.
The Board of Tax Appeals approved the determination of the Commissioner, and found against the petitioner, from which action of the Board this...
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