Dowd v. Commissioner of Internal Revenue, 082461 FEDTAX, 69387

Docket Nº:69387.
Opinion Judge:DRENNEN, Judge:
Party Name:BENJAMIN S. and GERTRUDE M. DOWD, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
Attorney:Louis Hoppe Esq., for the petitioners. Norman L. Rapkin Esq., for the respondent.
Case Date:August 24, 1961
Court:United States Tax Court
 
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20 T.C.M. (CCH) 1220 (1961)

T.C. Memo. 1961-238

BENJAMIN S. and GERTRUDE M. DOWD, Petitioners,

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 69387.

United States Tax Court.

August 24, 1961

Held, petitioners failed to prove they are entitled to a net operating loss deduction in the years 1952 and 1953 based on a net operating loss carryover from 1951 because: (1) No evidence was offered with respect to petitioners' income for 1950 against which any operating loss for the year 1951 would first have to be carried back and it is impossible to compute from the evidence presented the amount of operating loss, if any available for carryforward to 1952 and subsequent years; (2) petitioners have failed to prove by competent evidence the amount of their operating loss, if any, in 1951.

Louis Hoppe Esq., for the petitioners.

Norman L. Rapkin Esq., for the respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION.

DRENNEN, Judge:

Respondent determined deficiencies in income tax due from petitioners for the taxable years 1952 and 1953 in the respective amounts of $2,289.42 and $1,803.74. The only issue for decision is whether petitioners are entitled to a net operating loss deduction in each of the taxable years 1952 and 1953, representing a net operating loss carryover from the taxable year 1951.

FINDINGS OF FACT.

Some of the facts have been stipulated and are found accordingly.

Benjamin S. Dowd and Gertrude M. Dowd were husband and wife residing during the years 1951, 1952, and 1953 in Rockville Centre, New York. They filed a joint Federal income tax return for the taxable year 1951 with the collector of internal revenue for the first district of New York. They filed joint Federal income tax returns for the taxable years 1952 and 1953 with the district director of internal revenue at Brooklyn, New York.

Benjamin S. Dowd (hereinafter referred to as Dowd) graduated from Yale University in 1918; Fordham Law School in 1933; New York University School of Finance in 1934; and he studied banking in Europe for 2 years. He served in the Army during World War I. Throughout his business career Dowd was active in a variety of business enterprises which included taking a trip to Czechoslovakia in 1924 in an effort to dispose of a quantity of neolite soles in which Bankers Trust Company and Goodyear Tire and Rubber Company had an interest, selling bonds on a commission basis in New York City and the operation of a bond department in a New York bank during the 1920's and 1930's, the formation and operation of a construction company to build buildings for the New York World's Fair in 1939-40, the production of synthetic coffee from rye in 1935-37, the formation and operation of a complex of corporations sometimes referred to as the Empire Ordnance group, which produced arms and armament for the British Government from 1940 to 1945, inclusive, the conversion and revitalization of Vulcan Iron Works from warwork to peacetime work in 1946-49, the formation of Hazleton Steel & Tubing Corporation, which is directly involved here, in 1950-51, and a mineral exploration project in Venezuela in 1952 and subsequent years.

Dowd was the principal or one of the principal movers in the conception of most of these enterprises. He usually acquired an equity interest in the corporations formed to conduct these enterprises and also usually became a salaried officer of the corporations. Dowd seldom sold his stock in these corporations until the corporations had become relatively inactive.

In early 1950 Dowd was approached be a citizens group from Hazleton, Pennsylvania, to help alleviate an unemployment situation which had developed in that area, and as an inducement for him to do so, arrangements were made to donate 28 acres of industrial-site land to Dowd for this purpose. Dowd conceived the idea of setting up a plant for the production of seamless steel tubing which was in short supply at that time. To carry out this plan, Dowd organized the Hazleton Steel & Tubing Corporation (hereinafter referred to as Hazleton) in September 1950 and became its sole officer and stockholder. The land was conveyed to the corporation, which appears to have been its only capital. Dowd was responsible for and arranged the organization, financing, lining up of key personnel and acquisition of machinery and other material requirements for Hazleton.

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