West Point Marion Coal Co. v. COMMISSIONER OF INTERNAL REVENUE, Docket No. 23515.

• Decision Date: 14 May 1930
• Docket Number: Docket No. 23515.
• Citation: 19 BTA 945
• Parties: WEST POINT MARION COAL CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Board of Tax Appeals

19 B.T.A. 945 (1930)

WEST POINT MARION COAL CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 23515.

Board of Tax Appeals.

Promulgated May 14, 1930.

W. A. Wood, C. P. A., for the petitioner.

W. F. Gibbs, Esq., for the respondent.

The Commissioner determined a deficiency of $884.07 in the petitioner's income tax for the calendar year 1922, of which amount $756.73 is contested. The only allegation of error is that the Commissioner erroneously disallowed the deduction of a net loss sustained by the West Point Marion Coal Works in the year 1921 in computing the petitioner's tax liability for 1922.

The facts are taken from the stipulation of the parties.

FINDINGS OF FACT.

The petitioner is a corporation existing under the laws of Pennsylvania, with its principal place of business in Dilliner, Pa. It had a capital stock of $160,000. The petitioner was granted its charter on December 8, 1921, application therefor having been made on November 30, 1921. The petitioner was formed to take over the business of the West Point Marion Coal Works, an association operating under a Massachusetts deed of trust. The predecessor business was organized October 1, 1914, with a capital of $15,000, and the trust agreement was recorded in Greene County, Pennsylvania. The members of the association were Asa M. Sterling, John B. Moore, and Harold M. Conn. Asa M. Sterling died in August, 1921, and the attorneys for the estate were unfamiliar with the operation of an association granted under a Massachusetts deed of trust and advised the surviving members that it would be expedient to incorporate. Steps were immediately taken to incorporate, which was accomplished on December 8, 1921. It was the intention to continue the business of the association, effective January 1, 1922. During April, 1922, the exact date not now known, a meeting of the stockholders of the petitioner was held, in which stock was to be issued to the shareholders of the association in proportion to their respective interests therein upon the conveyance to the corporation of all property of the association. The shares of the association were owned as follows:

                    Asa M. Sterling, 55% _______________________________ $8,250
                    John B. Moore, 40% _________________________________  6,000
                    Harold M. Conn, 5% _________________________________    750
                                                                        _______
                            Total ______________________________________ 15,000
                

After incorporation of the association, the shares of stock of the corporation were owned as follows:

                    Asa M. Sterling (estate), 55% ______________________ $88,000
                    John B. Moore, 40% _________________________________  64,000
                    Harold M. Conn, 5% _________________________________   8,000
                                                                         _______
                         Total _________________________________________ 160,000
                

The assets of the association were transferred by deed to the corporation on May 1, 1922, and recorded on May 11, 1922. The bank account was not changed to the corporation's name until April 16, 1923. The deed of trust under which the...