Coon Auto Co. v. Commissioner of Internal Revenue

• Decision Date: 07 October 1929
• Docket Number: No. 8155.,8155.
• Citation: 35 F.2d 504
• Parties: COON AUTO CO. v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Eighth Circuit

35 F.2d 504 (1929)

COON AUTO CO. v.COMMISSIONER OF INTERNAL REVENUE.

No. 8155.

Circuit Court of Appeals, Eighth Circuit.

October 7, 1929.

Joe H. Kirby, of Sioux Falls, S. D.(Kirby, Kirby & Kirby, of Sioux Falls, S. D., on the brief), for appellant.

A. H. Pierce, Sp. Atty., Bureau of Internal Revenue, of Washington, D. C. (Mabel Walker Willebrandt, Asst. Atty. Gen., J. Louis Monarch and Millar E. McGilchrist, Sp. Asst. Attys.Gen., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, of Washington, D. C., on the brief), for appellee.

Before KENYON and VAN VALKENBURGH, Circuit Judges, and OTIS, District Judge.

KENYON, Circuit Judge.

This is an appeal from a decision of the United States Board of Tax Appeals.Appellant, a corporation, was engaged in the automobile sales business.On January 13, 1919, its board of directors directed an arbitrary "write-off" of the book inventory as of December 31, 1918, amounting to $9,234.07.In the audit of petitioner's return for 1919, the Commissioner of Internal Revenue added to the net income returned the amount of this reduction, resulting in an increase of net income and an increase in appellant's tax.It is of this that complaint is made.Appellant kept a perpetual inventory at cost prices.No physical inventory was taken at the time of the mark-down, and the same was purely arbitrary, and admitted in the brief of counsel for appellant to be without right.

Appellant contends that, if the inventory at the close of the year is increased by the amount of $9,234.07, there should be a like increase in the inventory at the beginning of the year, and hence the net income would not be affected.There is nothing in the record to show the accounting method employed in the mark-down.The Board of Tax Appeals was without evidence as to the amount of the perpetual inventory shown by the books of account on December 31, 1918, before the write-off was effective in January, 1919, used in making its income tax returns for 1918 and 1919.It held that without such evidence it was unable to determine whether the Commissioner erred in adding to the net income reported the $9,234.07 in question.

Appellant urges that the statement in the Board's findings of fact that appellant's directors directed "an arbitrary write-off of the book inventory as of December 31, 1918, amounting to $9,234.07," is a finding that the opening inventory figure used in appellant's 1919 tax returns was a reduced figure.The phrase, "as of ...