Marshall v. Commissioner of Internal Revenue, Docket No. 20308.

• Decision Date: 01 March 1928
• Docket Number: Docket No. 20308.
• Citation: 10 BTA 1140
• Parties: EDWARD E. MARSHALL, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Board of Tax Appeals

10 B.T.A. 1140 (1928)

EDWARD E. MARSHALL, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 20308.

Board of Tax Appeals.

Promulgated March 1, 1928.

A. H. Jarman, Esq., for the petitioner.

P. M. Clark, Esq., for the respondent.

Petitioner appeals from a deficiency in income and profits taxes in the amount of $3,632.20 for the calendar year 1921, determined against him as the transferee of assets of the Bellefonte Lime & Stone Co. The determination was made against the petitioner under the provisions of section 280 of the Revenue Act of 1926.

FINDINGS OF FACT.

Petitioner is a resident of Pennsylvania, residing at Maybrook, and having his office at Philadelphia.

In the early part of 1918 petitioner attended a number of meetings at which members of the War Industries Board urged increased production of manganese and chrome ores for use in the manufacture of steel and dyestuffs and other articles contributing to the prosecution of the war. J. N. M. Shimer, a business associate of petitioner, learned of a deposit of material carrying chrome flakes at Nottingham, Pa., and, in view of the earnest solicitation of government officials, petitioner, Shimer and O. J. McNitt decided to attempt to work the deposit. McNitt purchased a one-third interest in the Bellefonte Lime & Stone Co., a Pennsylvania corporation. Shimer had no funds to put into the enterprise, but the Atlantic Ore & Alloys Co., in which the petitioner and Shimer owned all the stock, had a surplus of cash and that cash was used to purchase the other two-thirds of the Bellefonte company stock.

In March, 1918, the Bellefonte company secured a lease on the chrome property and began the construction of a plant and the purchase and installation of dredging and washing machinery. From that time until November 11, 1918, the company was engaged in the construction of its plant and installation of machinery preparatory to reclaiming the chrome. Upon the signing of the Armistice the urgent need for chrome ceased and the Bellefonte company never engaged in the production of it, and since that time the plant has not been operated.

Between the dates of March 1 and November 11, 1918, the Bellefonte company expended the following sums:

                Lease and investigation _________________________________  $3,100.00
                Equipment and machinery _________________________________   8,163.29
                Plant (sundries, labor, etc.) ___________________________  13,283.30
                Plant (construction wages) ______________________________   7,245.22
                Plant (salaries superintendent and engineer) ____________   2,183.72
                General expense (cars and miscellaneous) ________________   4,760.99
                                                                           _________
                       Total ____________________________________________  38,736.52
                

In 1921 or 1922 the Bellefonte company advertised its plant and held a public sale at which it sold the plant for $200. It also received from the salvage of machinery $5,000, and cars $300. Its lease has expired.

In 1919 the Bellefonte company, pursuant to the Act of Congress of March 2, 1919, 40 Stat. 1272, filed with the Secretary of the Interior a claim for losses in the amount of $42,995.38, alleged to have been sustained in its operation. This claim was numbered 814 and was taken under consideration by the War Minerals Relief Commission of the Department of the Interior. After a hearing, the Commission, under date of April 7, 1921, submitted a recommendation to the Secretary of the Interior which closed with the following recapitulation and conclusion:

                RECAPITULATION
                   Expenditure ______________________________________________  $33,508.26
                      Deductions
                         Salvage (actual sale) __________________   $5,050.00
                         (Est. value remaining equipment) _______    4,950.00
                         Purchase of lease ______________________    3,000.00
                         Salary deduction _______________________      459.49
                                                                   __________
                           Total deductions _____________________  $13,459.49
                                                                                13,459.49
                                                                                _________
                           Allowable net loss _______________________________  $20,048.77
                

CONCLUSION

It seems that the claimant acting upon specific request of the government expended money upon a property of commercial importance and as the result of such operations made a net loss of $20,048.77.

The...