Al Haft Sport Enterprises v. Commissioner of Int. Rev.

• Decision Date: 16 May 1951
• Docket Number: No. 11164.,11164.
• Citation: 189 F.2d 384
• Parties: AL HAFT SPORT ENTERPRISES, Inc. v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Sixth Circuit

189 F.2d 384 (1951)

AL HAFT SPORT ENTERPRISES, Inc. v. COMMISSIONER OF INTERNAL REVENUE.

No. 11164.

United States Court of Appeals Sixth Circuit.

May 16, 1951.

Roger K. Powell, Columbus, Ohio, (Roger K. Powell, Columbus, Ohio, on the brief), for petitioner.

Francis W. Sams, Washington, D. C. (Theron Lamar Caudle, Ellis N. Slack, Lee A. Jackson and Francis W. Sams, all of Washington, D. C., on the brief), for respondent.

Before HICKS, Chief Judge, and SIMONS and McALLISTER, Circuit Judges.

HICKS, Chief Judge.

Petition by the Al Haft Sport Enterprises, Inc., a corporation, to review a decision of the Tax Court determining a deficiency in income tax for 1943, in the amount of $937.35; a deficiency in declared value excess profits tax for the same year in the amount of $861.24; and a deficiency in excess profits tax for the same year in the amount of $4,116.11, plus a penalty of $1,036.53.

In 1943 A. C. Haft, Jr., known as Al Haft, the Secretary-Treasurer and General Manager of petitioner, was paid a salary of $18,262.00. The Commissioner disallowed $8,262.00 of this salary and the Tax Court sustained this action of the Commissioner.

Before World War I Al Haft was a professional wrestler under the name of "Young Gotch." He later became a promoter of wrestling matches and prize fights. In 1934 he incorporated the petitioner with a paid in capital of $500. Petitioner issued ten shares of stock, all owned by Haft. Petitioner was in fact an alter ego for Haft.

The record discloses that on April 5, 1943, although Haft really owned the entire stock, the ostensible shareholders, namely, Haft, his wife, M. L. Haft, and one H. H. Hamer, who had for years been associated with Haft, had a shareholders' meeting and at this meeting these individuals elected themselves as the board of directors for that year. This meeting adopted the following resolution: "Resolved, that if any of the directors should be chosen as officers of the corporation, then the yearly salaries of such officers be hereby fixed as follows: President $5000, Vice-President $ none; Secretary-Treasurer $15,000."

Following this meeting, the directors so elected, held a meeting at which Hamer was elected president and Haft was elected secretary-treasurer. This procedure had been followed for preceding years since the organization of the corporation with the exception that in the earlier years other parties appeared as shareholders but in each year the salary of Al Haft as secretary-treasurer was fixed at $15,000. In addition to the $15,000 paid to Haft as secretary-treasurer for 1943, he was paid $3,262 as partial payment upon unpaid salaries for previous years, although the record does not disclose that this payment was ever authorized by the board of directors.

We spend but little time with reference to the $3,262 payment. It was admittedly not a payment upon the salary of Haft for services incurred during the taxable year and was not therefore deductible under the statute. 26 U.S.C.A. § 23.

The remaining question is, whether the $5,000 deducted by the Commissioner from the...