NORTH TEXAS LUMBER CO. v. COMMISSIONER OF INTERNAL REVENUE
| Decision Date | 01 September 1927 |
| Docket Number | Docket No. 5208. |
| Parties | NORTH TEXAS LUMBER CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
Joseph J. Eckford, Esq., for the petitioner.
S. S. Faulkner, Esq., for the respondent.
The petitioner seeks a redetermination of a deficiency of $19,733.90 in income and profits taxes for 1917, arising from the denial by the Commissioner of a claim for the abatement of an assessment of additional tax. The only question involved is whether the profit from the sale of certain timber lands was income to the petitioner in the year 1916 or in the year 1917.
FINDINGS OF FACT.
The taxpayer, a corporation, was organized in November, 1909, under the laws of the State of Texas and was engaged in the business of operating a saw mill, and buying and selling timber land, as well as the manufacture and sale of rough and finished lumber. The corporation conducted the business continuously from its inception in 1909 down to the year 1917, when liquidation was effected subsequent to disposal of the timber land. The authorized and fully paid capital amounted to $50,000. The books of the taxpayer were kept on an accrual basis.
During the summer or fall of 1916, officers of appellant negotiated with the officers of the Southern Pine Lumber Co. for the sale of timber lands, known as the Knox Lands, title to which was in appellant and also in the Clark & Boice Lumber Co. and a minor, Kelly Morse. On December 27, 1916, the price was agreed upon and an option contract executed at Dallas, Tex., reading as follows:
STATE OF TEXAS
COUNTY OF DALLAS.
THE FOLLOWING CONTRACT AND AGREEMENT is this day entered into by and between Clark & Boice Lumber Company, North Texas Lumber Company, and Wesley Morse, Parties of the First Part, and the Southern Pine Lumber Company, Party of the Second Part:
In consideration of the sum of One Hundred ($100.00) Dollars to Parties of the First Part paid by Party of the Second Part Parties of the First Part hereby grant, contract and convey to Party of the Second Part an option for the period of ten (10) days from the date hereof, to purchase of one or more of the Parties of the First Part the hereinafter described property upon the terms and for the consideration hereinafter named.
The property to be purchased from the Clark & Boice Lumber Company consists of the property out of the Jose Maria Mora grant in Anderson County, conveyed to Clark & Boice Lumber Company by Fannie M. Shelton and husband, and Orra G. More, by deed dated July 25, 1916, and duly recorded in Vol. 113, Page 612, Deed Records of Anderson County, Texas, to which deed and the record thereof reference is here made for a more particular description of said property, consisting of about one thousand and fifty four (1054) acres of land.
From the North Texas Lumber Company — all of the property situated in Anderson and Cherokee Counties, Texas, described in a certain deed from Hiram Knox and Mary S. Knox, to North Texas Lumber Company, dated May 18, 1915, and duly recorded in the Deed Records of Cherokee and Anderson Counties, Texas, to which deed and record thereof reference is here made for a more particular description of said property, consisting of about 14,000 acres of land.
Also from the North Texas Lumber Company — the timber rights vested in it, the said North Texas Lumber Company, by a certain contract between C. Lombardi and Caroline Ennis Lombardi, and the North Texas Lumber Company, dated March 8, 1915, upon about 1213 acres of land in the Highsmith survey and T. P. Hotchkiss survey in Anderson County; reference being here made to said contract for a more particular description of said land. Also the timber rights vested in James Kelly Morse by a conveyance from the State of Texas upon one hundred (100) acres of land situated in Cherokee County, Texas, the said conveyance from the State of Texas being dated in the year 1916, and the only contract of that nature existing between the State of Texas and the said James Kelly Morse.
The consideration for said conveyance is the sum of Two Hundred Thirteen Thousand Five Hundred ($213,500.00) Dollars, cash, and the agreement and assumption by the said Southern Pine Lumber Company of the unpaid purchase money, principal and interest, against any of the properties above named and the obligation of the grantee, as evidenced by the various instruments herein referred to, and all unpaid taxes against said land. Land, timber rights, and other rights is to be conveyed by Parties of the First Part to Party of the Second Part by Special Warranty deed, but any rights that any of said Parties of the First Part may have by reason of warranties and the like, are to be conveyed and vested in said Southern Pine Lumber Company.
In case said Southern Pine Lumber Company exercises the option herein granted within the time herein named then the One Hundred ($100.00) Dollars paid at the time of the execution of this instrument, receipt of which is hereby acknowledged, is to be credited upon and to be a part of the cash consideration above named of Two Hundred and Thirteen Thousand Five Hundred ($213,500.00) Dollars. The Southern Pine Lumber Company is to make known the exercise of this option by a written instrument delivered to the Clark & Boice Lumber Company at its office in Dallas, Texas, within ten (10) days or mailed to it by registered letter within said ten (10) days from some point in the State of Texas, the date of mailing to be indicated by the post mark upon such letter. A satisfactory indemnity obligation is to be executed by Wesley Morse to the Southern Pine Lumber Company to protect it in accepting a deed from James Kelly Morse to his rights to the one hundred (100) acres hereinabove mentioned.
WITNESS OUR HANDS RESPECTIVELY this 27th day...
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