Reading Co. v. United States, 48800.

• Decision Date: 09 July 1951
• Docket Number: No. 48800.,48800.
• Citation: 120 Ct. Cl. 223,98 F. Supp. 598
• Parties: READING CO. v. UNITED STATES.
• Court: U.S. Claims Court

98 F. Supp. 598

120 Ct. Cl. 223

READING CO. v. UNITED STATES.

No. 48800.

United States Court of Claims.

July 9, 1951.

John E. McClure, Washington, D. C. (William I. Woodcock, Jr., Philadelphia, Pa., George L. Updike, and George A. Horkan, Washington, D. C., on the brief), for plaintiff.

Elizabeth B. Davis, Washington, D. C., Theron Lamar Caudle, Asst. Atty. Gen. (Andrew D. Sharpe, Ellis N. Slack, and John A. Rees, Washington, D. C., on the brief), for defendant.

Before JONES, Chief Judge, and LITTLETON, WHITAKER, MADDEN and HOWELL, Judges.

LITTLETON, Judge.

For the fiscal year ended June 30, 1945, plaintiff was required to file a capital stock tax return on or before July 31, 1945, and to pay the capital stock tax shown to be due thereon upon the basis of the value declared by plaintiff for its capital stock at the rate of $1.25 on each $1,000 of declared value. As shown in finding 2, plaintiff requested of the Collector of Internal Revenue an extension of time for the filing of its capital stock tax return until September 29, 1945, due to the fact that final decision had not been made concerning certain phases of the refinancing that plaintiff had undertaken with respect to a substantial portion of its funded indebtedness, which decision would have an important bearing in the determination of the net results from operations for the calendar year 1945. The value to be declared by plaintiff for its capital stock, for the purpose of the capital stock tax liability, had an important bearing upon its declared value excess profits tax liability under the income tax statutes, based upon its estimated taxable net income for the calendar year 1945. The Collector granted the extension of time requested for the filing of the capital stock tax return to September 29, 1945, within which to file such return and pay the tax "without incurring penalty for delinquent filing." The Collector, however, advised plaintiff that this extension was granted upon the condition that interest at the rate of 6 percent per annum would have to be paid upon the capital stock tax from July 31, 1945, to the date of payment.

As shown in the findings, the plaintiff in order to avoid payment of interest upon its capital stock tax after July 31, estimated its capital stock tax liability to be $150,000 for the fiscal year and sent the Collector its check for that amount. This estimated capital stock tax was predicated on an estimate made in July 1945 of plaintiff's estimated taxable net income for the calendar year 1945 of $11,425,000 (finding 4).

Had conditions remained unchanged throughout the calendar year 1945 with respect to plaintiff's income tax liability for the calendar year 1945, as plaintiff had estimated with respect thereto in July of that year, the plaintiff's estimate of the capital stock tax which would have been due, would have been the amount of $150,000 paid to the Collector in July; however, as shown in findings 5 and 6, certain events occurred which materially affected the plaintiff's July 1945 estimate of its 1945 taxable net income, as a result of which plaintiff reestimated its 1945 taxable income to be $1,043,000 instead of $11,425,000. As a result of this, and in order to provide for a credit of at least the amount of $1,043,000, and to provide for a margin of safety against the declared value excess profits tax, as provided for in Section 600 of the Internal Revenue Code, 26 U.S.C.A. § 600, plaintiff revised its estimated declared value for its capital stock from $120,000,000 to $40,000,000, thus giving it a credit of 10 percent thereof, $4,000,000, which, at $1.25 a thousand, resulted in a capital stock tax of $50,000.

Upon the filing of the capital stock tax return within the time, as extended, plaintiff filed a claim for refund of $100,000 of the estimated capital stock tax of $150,000, paid in July of that year. The Treasury Department allowed and paid the...