Henninger v. COMMISSIONER OF INTERNAL REVENUE, Docket No. 40690.
| Decision Date | 19 January 1931 |
| Docket Number | Docket No. 40690. |
| Citation | 21 BTA 1235 |
| Court | U.S. Board of Tax Appeals |
| Parties | F. W. HENNINGER, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
Joseph M. Kennedy, Esq., for the petitioner.
O. J. Tall, Esq., for the respondent.
This proceeding is for the redetermination of deficiencies in income tax asserted by the respondent in the amounts of $4,628.11 for the year 1924, and $3,641.23 for the year 1925. The petitioner's alleges that the respondent erred in including in the petitioner's income, money received by him in 1924 and 1925, representing his portion of distributions made in those years by the Kennywood Park Corporation, the Kennywood Scenic Railway Co., the Kennywood Toboggan Co., and the Kennywood Racing Coaster Co.
FINDINGS OF FACT.
The petitioner is an individual residing in Pittsburgh, Pa. During the years 1924 and 1925 he was a stockholder, and the secretary and treasurer of the Kennywood Park Corporation, which operated an amusement park in Pittsburgh. The corporation was organized in 1916 with a capital stock of $100,000, divided into 1,000 shares of common stock of the par value of $100 each, all of which was issued for the assets of the value of $100,000 belonging to a limited partnership which had theretofore conducted said park. The members of the partnership became the stockholders of the corporation. The petitioner owned 435 shares of said stock during the year 1924 and 485 shares during the year 1925. During the years 1924 and 1925 the petitioner was also a stockholder of the following corporations: The Kennywood Scenic Railway Co., the Kennywood Toboggan Co., and the Kennywood Racing Coaster Co.
During the years 1917 to 1920, inclusive, the Kennywood Park Corporation paid dividends in excess of its net earnings, thus creating a capital deficit in the amount of $75,090.86. At the close of the year 1923 the corporation had accumulated earnings in the amount of $74,902.13 without deduction for the capital deficit of $75,090.86.
The corporation filed income-tax returns for the years 1924 and 1925 showing a net income of $55,161.97 for 1924 and $99,133.40 for 1925. The respondent, upon audit of the returns, disallowed certain deductions taken by the corporation and increased the net income for 1924 to $87,297.08 and the net income for 1925 to $108,417.08.
Prior to the year 1924 the Kennywood Toboggan Co. paid dividends in excess of its earnings, thus creating a capital deficit at the end of the year 1923 in the amount of $24,152.33. The corporation's net earnings for 1924 were $5,012.48 and for 1925 were $4,787.26.
Prior to the year 1924 the Kennywood Scenic Railway Co. paid dividends in excess of its earnings, thus creating a capital deficit of $18,246.95 at the end of the year 1923. The corporation had no net earnings in 1924. In the year 1925 its net earnings were $10,737.06.
Prior to the year 1924 the Kennywood Racing Coaster Co. paid dividends in excess of its earnings, thus creating a capital deficit at the end of the year 1923 in the amount of $48,923.33. In the years 1924 and 1925 the accumulated earnings of the corporation, without deduction for the accumulated capital deficit, amounted to $23,760.51 and $19,571.43, respectively.
In the years 1924 and 1925 distributions were made to their stockholders by the Kennywood Park Corporation, the Kennywood Scenic Railway Co., the Kennywood Toboggan Co., and the Kennywood Racing Coaster Co., of which the petitioner received his proportionate share. The petitioner in his returns for 1924 and 1925 reported that part of the amounts so received by him was taxable income and that the remainder was return of capital. The respondent determined that the portion of said distributions constituting taxable income to the petitioner was larger than reported by him, and he increased the petitioner's income accordingly. The amounts of said distributions, the amounts received by the petitioner, the amounts reported by him as taxable income and return of capital, respectively, and the adjustments made by the respondent, are as follows:
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| | | | Reported on return | Amounts shown in
| | Amount | Petitioner's | | deficiency notice
| Year | of dividend | share |--------------------------|--------------------------
| | | | Taxable | Non-taxable | Taxable | Non-taxable
---------------------------------------|------|-------------|--------------|------------|-------------|------------|-------------
Kennywood Park Corporation ___________ | 1924 | $80,000 | $34,800 | $18,532.00 | $16,268.00 | $34,800.00 | None
| 1925 | 80,000 | 38,800 | 27,333.35 | 11,466.65 | 38,800.00 | None
Kennywood Scenic Railway _____________ | 1924 | None. | None. | None. |
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