Hoffman v. United States, 7820.

• Decision Date: 28 August 1931
• Docket Number: No. 7820.,7820.
• Citation: 52 F.2d 269
• Parties: HOFFMAN et al. v. UNITED STATES.
• Court: U.S. District Court — Western District of Missouri

52 F.2d 269 (1931)

HOFFMAN et al. v. UNITED STATES.

No. 7820.

District Court, W. D. Missouri, W. D.

August 28, 1931.

Howard L. Jamison, H. R. McMorris, and Harry A. Gilford, all of Kansas City, Mo., for the plaintiffs.

Chet A. Keyes, Asst. U. S. Atty., of Kansas City, Mo. (C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and Henry L. Young, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., and Wm. L. Vandeventer, U. S. Atty., of Kansas City, Mo., on the brief), for the United States.

OTIS, District Judge.

Plaintiffs, as trustees for the Kansas Flour Mills Company, which was dissolved February 15, 1928, bring this action to recover an alleged excess tax payment made by that company for the fiscal year commencing June 1, 1922, and ending May 31, 1923. The facts are stipulated. That stipulation is by reference incorporated herein.

It appears from the stipulation of facts that on July 4, 1922, the flour mills company affiliated with itself the Cereals Company, incorporated on that date, all of the stock of which (except qualifying shares) the Flour Mills Company acquired. The Cereals Company was organized for the sole purpose of building an elevator for the Flour Mills Company.

On August 3, 1923, the Flour Mills Company filed a consolidated income tax return for itself and its subsidiary, the Cereals Company, reporting a consolidated income of $211,138.96, on which it paid a tax of $21,627.73.

On May 31, 1922, the Flour Mills Company had an unabsorbed balance of a net loss remaining for the year ending May 31, 1922, amounting to $105,284.32.

If there had been no affiliation with the Cereals Company on July 14, 1922, the Flour Mills Company, it is conceded, would have been entitled to deduct this amount from its income for the year ending May 31, 1923, in arriving at the proper basis for the calculation of its tax for that year.

The applicable statute is section 204 (b) of the Revenue Act of 1921 (42 Stat. 231) which is: "(b) If for any taxable year beginning after December 31, 1920, it appears upon the production of evidence satisfactory to the Commissioner that any taxpayer has sustained a net loss, the amount thereof shall be deducted from the net income of the taxpayer for the succeeding taxable year; and if such net loss is in excess of the net income for such succeeding taxable year, the amount of such excess shall be allowed as a deduction in computing the net income for the next succeeding taxable year; the deduction in all cases to be made under regulations prescribed by the Commissioner with the approval of the Secretary."

The defendant's contention is that the phrase in the statute "the next succeeding taxable year" under the facts in this case means, not a full year of twelve months, but only that period from May 31, 1922, to July 14, 1922, that is the period before the affiliation, for which a separate return, says the defendant, should have been filed. In other words, the defendant...