Great Northern Railway Co. v. Commissioner of Internal Revenue
| Decision Date | 22 September 1927 |
| Docket Number | Docket No. 8433,11850. |
| Citation | 8 BTA 225 |
| Parties | GREAT NORTHERN RAILWAY CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
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J. P. Plunkett, Esq., and F. G. Dorety, Esq., for the petitioner.
M. N. Fisher, Esq., for the respondent.
These are proceedings for the redetermination of deficiencies in income tax for the years 1917, 1918, and 1919 as follows:
1917 _______________________________________________ $121,149.59
1918 _______________________________________________ 529,249.86
1919 _______________________________________________ 26,643.55
The petitioner alleges that the taxes in controversy for the several years are as follows:
1917 _______________________________________________ $130,056.13
1918 _______________________________________________ 536,739.06
1919 _______________________________________________ 32,030.40
The assignments of error with respect to the year 1917 are as follows:
1. The failure of the Commissioner to allow as a deduction from the gross income of the taxpayer ordinary and necessary expenses incurred, in the amount of $422,677.80, said failure resulting in proposed additional taxes of $25,360.67.
2. The failure of the Commissioner to allow as a deduction from the gross income of the taxpayer the sum of $4,587.02 paid to the United States Government as fines for the violation of Federal Statutes and Regulations, such failure resulting in proposed additional taxes of $275.22.
3. The error of the Commissioner in determining that interest to the amount of $1,572,100.07, due the taxpayer for the year 1917, but not received or accrued on its books, on interest-bearing obligations of the Spokane, Portland and Seattle Railway Company held by the taxpayer, constituted taxable income of the taxpayer for that year, such error resulting in proposed additional taxes of $94,326.00.
4. The error of the Commissioner in determining that interest to the amount of $29,558.61 due the taxpayer for the year 1917, but never received or accrued on its books, on advances made to the Glacier Park Hotel Company by the taxpayer, constituted taxable income of the taxpayer for that year, such error resulting in proposed additional taxes of $1,773.52.
5. The error of the Commissioner in determining that interest to the amount of $3,518.97 due the taxpayer for the year 1917, but never received or accrued on its books, on advances made to the South Butte Mining Company by the taxpayer, constituted taxable income of the taxpayer for that year, such error resulting in proposed additional taxes of $211.14.
6. The error of the Commissioner in determining that interest to the amount of $90,000.00, due the taxpayer for the year 1917, but never received or accrued on its books, on notes of the Washington & Great Northern Townsite Company held by the taxpayer, also interest on unpaid installments of interest on such notes, amounting to $14,085.58, likewise never received or accrued on the taxpayer's books, constituted taxable income of the taxpayer for that year, such error resulting in proposed additional taxes of $6,245.13.
7. The failure of the Commissioner to allow as a basis of deduction from the gross income of the taxpayer, the fair market value as of March 1, 1913, of certain equipment acquired by the taxpayer prior to March 1, 1913, and scrapped or otherwise disposed of during the year 1917, such failure resulting in excess taxes for the year of $1,864.45.
The assignments of error for the years 1918 and 1919 are as follows:
1. The failure of the Commissioner to find that capital stock of the Spokane and Inland Empire Railroad Company, held by taxpayer and ascertained to be worthless in the year 1918, had a value on March 1, 1913, equal to the cost thereof, and his failure to use such value as a basis of ascertaining the loss sustained, such failure resulting in proposed additional taxes of $216,689.70.
2. The failure of the Commissioner to find that certain parcels of land, sold by the taxpayer in 1918, had a value on March 1, 1913, in excess of cost and equal to the selling price received in 1918, and his failure to use such value as a basis of ascertaining gain or loss, such failure resulting in proposed additional taxes of $274.59.
3. The error of the Commissioner in determining that interest due the taxpayer for the years 1918 and 1919, but never received or accrued on its books, on interest-bearing obligations of the Spokane, Portland and Seattle Railway Company held by the taxpayer, constituted taxable income of the taxpayer for those years, such error resulting in proposed additional taxes of $151,978.47 for the year 1918 and $121,458.17 for the year 1919.
4. The error of the Commissioner in determining that the value of labor and material furnished, free, by various individuals and corporations, and of cash reimbursements made by such individuals and corporations during the years 1918 and 1919 in connection with the construction of private and public crossings, industry spur tracks and other facilities under agreements providing that the title to such facilities would be in the taxpayer, constituted taxable income of the taxpayer, for those years, such error resulting in proposed additional taxes of $2,811.60 for the year 1918 and $1,530.32 for the year 1919.
5. The error of the Commissioner in reducing the taxable income of the taxpayer for each of the years 1918 and 1919 in the amount of $53,635.77, to agree with a certificate issued by the Interstate Commerce Commission under date of January 5, 1922, reducing the annual compensation of the taxpayer under the Federal Control Act in that amount, such error resulting in proposed reduction of taxes for the year 1918 of $5,363.58 and for the year 1919 of $4,290.86 and in proposed additional taxes for the year 1921 of $10,727.15.
6. The error of the Commissioner in determining that the taxable income of the taxpayer for the year 1918 should be increased in the sum of $693,005.39 and that the taxable income for the year 1919 should be decreased in the sum of $1,218,434.89 in order that the account representing interest due from the Director General of Railroads for those years might correspond with what is alleged to have been allowed by the Director General in final settlement, such error resulting in proposed additional taxes for the year 1918 of $69,300.54, in proposed reduced taxes for the year 1919 of $97,474.79, and proposed additional taxes for the year 1921 of $52,542.95.
7. The refusal of the Commissioner to permit the taxpayer and the Farmers Grain and Shipping Company to file a consolidated income tax return for the years 1918 and 1919 and his error in determining that interest due the Brandon, Devils Lake and Southern Railway Company, a corporation, affiliated with the taxpayer, for the years 1918 and 1919, but never received or accrued on its books, on bonds of the Farmers Grain and Shipping Company held by the Brandon, Devils Lake and Southern Railway Company, constituted taxable income of the taxpayer for those years, such error resulting in proposed additional taxes of $2,628.00 for the year 1918 and $2,190.00 for the year 1919.
8. The failure of the Commissioner to allow as a deduction from the gross income of the Great Northern Express Company, a corporation affiliated with the taxpayer, in the year 1918, the amount paid to the U. S. Government in that year as a fine for the violation of a customs regulation, such failure resulting in proposed additional taxes of $1.68.
9. The error of the Commissioner in determining that the Northern Steamship Company, a corporation affiliated with the taxpayer, had sold its steamship "Northland" to the Davie Shipbuilding and Repair Company in 1918 at a profit of $65,207.13, and in increasing the taxable income of the taxpayer for the year 1918 in that amount, such error resulting in proposed additional taxes for that year of $7,824.85 and in a proposed reduction of taxes for the year 1919 of $2,173.57.
10. The error of the Commissioner in increasing the taxable income of the Duluth and Superior Bridge Company, a corporation affiliated with the taxpayer, for each of the years 1918 and 1919 in the sum of $325.00 to agree with a certificate issued by the Interstate Commerce Commission under date of May 4, 1921, increasing the annual compensation of that company under the Federal Control Act in that amount, such error resulting in proposed additional taxes for the year 1918 of $32.50 and for the year 1919 of $26.00, and in a proposed reduction in taxes for the year 1921 of $65.00.
11. The error of the Commissioner in reducing the taxable income of the Duluth Terminal Railway Company, a corporation affiliated with the taxpayer, for each of the years 1918 and 1919 in the sum of $16,068.00, to agree with a certificate issued by the Interstate Commerce Commission under date of May 4, 1921, reducing the annual compensation of that company under the Federal Control Act in that amount, such error resulting in a proposed reduction in the taxes for the year 1918 of $1,606.80 and for the year 1919 of $1,285.44, and in proposed additional taxes for the year 1921 of $3,213.60.
12. The error of the Commissioner in reducing the taxable income of the Watertown and Sioux Falls Railway Company, a corporation affiliated with the taxpayer, for each of the years 1918 and 1919 in the sum of $21,115.08, to agree with a certificate issued by the Interstate Commerce Commission under date of September 12, 1921, reducing the annual compensation of that company under the Federal Control Act in that amount, such error resulting in a proposed reduction in the taxes for the year 1918 of $2,111.51, for the year 1919 of $1,689.21 and in proposed additional taxes for the year 1921 of $4,223.02.
13. The error of the Commissioner in computing the additional tax due from the taxpayer for the year 1918 at the...
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