Dayton Rubber Co. v. Shaw
| Decision Date | 23 May 1956 |
| Docket Number | No. 26,26 |
| Citation | 244 N.C. 170,92 S.E.2d 799 |
| Court | North Carolina Supreme Court |
| Parties | The DAYTON RUBBER COMPANY v. Eugene SHAW, Commissioner of Revenue of the State of North Carolina. |
William Medford, Waynesville, for plaintiff.
Wm. B. Rodman, Jr., Atty. Gen., Samuel Behrends, Jr., Asst. Atty. Gen., for the State.
It is conceded in the plaintiff's brief that the only disputed fact involved in this appeal is whether or not its claim has been handled in accordance with established administrative procedure by the North Carolina Department of Revenue. In our opinion, the finding of fact by the court below on this question is supported by competent evidence and is, therefore, not reviewable on appeal. Ryan v. Wachovia Bank & Trust Co., 235 N.C. 585, 70 S.E.2d 853; Town of Burnsville v. Boone, 231 N.C. 577, 58 S.E.2d 351; Scott & Co. v. Jones, 230 N.C. 74, 52 S.E.2d 219. Consequently, the appeal only presents for our consideration and determination certain questions which involve an interpretation of the loss carry-over provisions contained in G.S. § 105-147(6) (d) and which are applicable to foreign and domestic corporations as well as to resident individuals.
The questions raised may be stated as follows: (1) Was the Commissioner of Revenue correct in his conclusion that under the above statute all income of the plaintiff, including that from nonunitary business, must be considered before a loss can be established that may be carried over to the next tax year? (2) Must the loss be further reduced by including the nontaxable income received by the taxpayer in the year in which the loss is sought to be used as a deduction?
The reasons for permitting the carryover loss deduction and for imposing the restrictions and limitations on it are set forth in paragraph First, subsection (d), of G.S. § 105-147(6), as follows: 'First, the purpose in allowing the deduction of net economic loss of a prior year or years is that of granting some measure of relief to taxpayers who have incurred economic misfortune or who are otherwise materially affected by strict adherence to the annual accounting rule in the determination of taxable income, and the deduction herein specified does not authorize the carrying forward of any particular items or category of loss except to the extent that such loss or losses shall result in the impairment of the net economic situation of the taxpayer such as to result in net economic loss as hereinafter defined.'
How the economic loss shall be determined is set forth in paragraphs Second and Third of the above statute, as follows: 'Second, the net economic loss for any year shall mean the amount by which allowable deductions for the year other than contributions, taxes on property held for personal use, and interest on debts incurred for personal rather than business purposes shall excluding and income not taxable under this article.
'Third, any net economic loss of a prior year or years brought forward and claimed as a deduction in any income year may be deducted from taxable income of the year only to the extent that such carry-over loss from the prior year or years shall exceed any income not taxable under this article received in the same year in which the deduction is claimed, * * *.'
We need not discuss the statute, G.S. § 105-134, subd. II, with respect to the method used to arrive at the formula applicable to income earned by a foreign corporation in a multiple-state business. It is conceded that the formula percentage for each year involved is correct. It is further conceded by the defendant that the plaintiff in computing its economic loss in 1949, properly excluded the named deductions in the second paragraph of subsection (d) of G.S. § 105-147(6) as set forth above, but it did not take into account other income received but not taxable under G.S. § 105-134.
It is also conceded by the defendant that the royalty income of the plaintiff in 1949 and 1950 was from nonunitary business operations having no relation or connection with the plaintiff's manufacturing activities in North Carolina. Thus, it is clear that no part of it could be taxed as income in North Carolina. However, including this nontaxable income, in arriving at an allowable deduction for carry-over purposes to be deducted from taxable income in a succeeding year, is, in our opinion, required by G.S. § 105-147(6) (d), and we so hold. Our Legislature was under no constitutional or other legal compulsion to allow any carry-over to be deducted from taxable income in a future...
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Aronov v. Secretary of Revenue
...which the state gratuitously confers. See Maxwell v. Bugbee, 250 U.S. 525, 40 S.Ct. 2, 63 L.Ed. 1124; Rubber Co. v. Shaw, Comr. of Revenue, 244 N.C. 170, 92 S.E.2d 799 (1956); Ward v. Clayton, Com'r of Revenue, 5 N.C.App. 53, 167 S.E.2d 808 (1969), aff'd, 276 N.C. 411, 172 S.E.2d 531 (1970)......
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