Northwestern Jobbers Credit Bureau v. Commissioner of Internal Revenue
| Decision Date | 19 November 1928 |
| Docket Number | Docket No. 29373. |
| Citation | 14 BTA 362 |
| Parties | NORTHWESTERN JOBBERS CREDIT BUREAU, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
Guy Chase, Esq., for the petitioner.
A. H. Fast, Esq., for the respondent.
The respondent asserts a deficiency in income tax for the fiscal year ended June 30, 1926, in the amount of $1,209.63. Two issues are submitted for the consideration of the Board — (1) Whether the petitioner is an exempt corporation under the provisions of section 231(7) of the Revenue Act of 1926, and (2) whether interest on bank deposits of trust funds was income to the petitioner in the taxable year.
FINDINGS OF FACT.
The petitioner is a Minnesota corporation with its principal office and place of business at St. Paul. It was incorporated in 1906 and since that date has been actively pursuing the purposes set forth in its articles of incorporation. Its authorized capital stock is $10,000, divided into shares of the par value of $10 each.
In the taxable year the petitioner's articles of incorporation pertinent to the issues here were as follows:
* * * The general nature of the business of this corporation shall be to operate a bureau for the conduct, management, preservation, care and disposition of the business, property and assets of persons, co-partnerships and corporations which shall become financially embarrassed, insolvent or bankrupt, and in connection therewith, through its officers or other persons, attorneys or agents employed by it to act for and represent creditors at creditors' meetings or other meetings in the selection of receivers, trustees or other agents for the care or management, or sale or other disposition of the property of such insolvents, bankrupts or others who are in embarrassed circumstances and to act generally for creditors and others in the preservation, management and disposition of the property and assets of such insolvents, bankrupts or others in embarrassed circumstances, and in the adjustment, collection and securing of such claims.
To obtain and furnish to its stockholders and such other persons as shall desire its services, information as to the financial standing and other information affecting the credit and rating of the customers and proposed customers of its stockholders and other patrons, and operate a department for this purpose.
To act generally in the interest of the jobbing trade in the prevention and prosecution of imposition, injustice and fraud and take such lawful steps as it shall deem proper and necessary to induce the passage of such laws as will promote the general welfare and security of the trade, and to act generally for creditors in the adjustment, collection and securing of claims.
This corporation is not organized for the purpose of any pecuniary gain for stockholders, and it shall not declare or pay any dividend upon its capital stock. All earnings not consumed in operating expenses shall be kept in a fund to be disbursed from time to time upon the order of the Board of Directors to further the purposes of the corporation. This corporation shall not sell or negotiate the sale of any stocks, bonds or securities of any kind as an investment and shall not be conducted as a financial investment for profit.
The petitioner's gross profits and the sources thereof in the taxable year were as follows:
Gross profit from operations
Bureau earnings _______________________________________________ $53,999.45
Postage, stationery and stenographic services _________________ 12,133.05
Interchange Department earnings _______________________________ 30,511.16
Financial statement earnings __________________________________ 535.79
Commissions ___________________________________________________ 12,199.61
Miscellaneous income and bad debts recovered __________________ 524.97
___________
109,904.03
The item of bureau earnings listed in the above statement of gross profits in the amount of $53,999.45 represents fees paid to the petitioner for its services as receiver in bankruptcy, trustee in bankruptcy, common law trustee, and other amounts earned by it in connection with its business of handling bankrupt properties in conformity with the purposes set forth in the articles of incorporation. The item of $12,199.61 represents commissions received by the petitioner in payment for its services to properties or firms in business difficulties that did not result in bankruptcy proceedings. In this connection the petitioner takes charge of the business of concerns in financial distress, advances funds for the continued operation thereof, and supplies management, direction and advice that frequently result in rehabilitation and continued operation. For its services in connection with bankruptcies it receives the fees allowed by law and the courts, and for its advice, management and direction in connection with firms financially embarrassed but not in receivership or trusteeship it receives a commission of 7½ per cent on all amounts paid to the creditors of such concerns as the result of its services.
The petitioner maintains what is called a department for the interchange of information among its stockholders. In this connection it furnishes "ledger information" relating to the credit of business firms, both to its shareholders and to others. For this service it received compensation in the taxable year in the amount of $30,511.16.
The stockholders of the petitioner are wholesale dealers and jobbers of merchandise of various sorts in Minnesota, Wisconsin, Iowa, the Dakotas and Montana. Not more than one share is owned by any firm. No dividends have ever been declared or paid by the petitioners.
For the taxable year the petitioner timely made...
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