Kimball Tyler Co. v. Commissioner

*730 The respondent has determined that under section 280 of the Revenue Act of 1926, the petitioner is liable for the amount of $512.26 for unpaid income and profits taxes assessed against the Kimball Tyler Co., a West Virginia corporation, for the fiscal year ended June 30, 1920, with any interest or penalty accrued thereon.

FINDINGS OF FACT.

The petitioner is a Maryland corporation with its principal office at Baltimore. It is the transferee of the assets of the Kimball Tyler Co., a West Virginia corporation. It is stipulated that as such transferee it is liable for any unpaid taxes due by such West Virginia corporation for the fiscal year ended June 30, 1920.

The business of the West Virginia corporation, the original taxpayer here, in the fiscal year ended June 30, 1920, was conducted on land and in a building*2599 owned individually by the stockholders thereof. Due to the need of additional capital for business operations, such stockholders leased the buildings and land to the corporation at an annual rental of $6,700 per year. The parties agree that for the fiscal year ended June 30, 1920, the fair rental value of said land and buildings was $8,500.

OPINION.

LANSDON: The petitioner admits its liability for any income and profits taxes due by the original taxpayer for the fiscal year ended June 30, 1920. It contends, however, that in the computing of the deficiency involved the taxpayer should have the benefit of section 328 of the Revenue Act of 1918.

The only abnormality in income or invested capital alleged is that in the taxable year the taxpayer leased buildings and land from its own stockholders at a rental considerably less than a fair price for such property. Such a situation, in our opinion, does not create an abnormality in income under the provisions of section 327. Moreover, we are not informed as to the terms of the lease other than the total rental received. We do not know whether the Commissioner has ever refused an application for relief under sections 327 and*2600 328 of the Revenue Act of 1918. Also it would appear that the alleged abnormality was voluntarily created by the owners of the corporation and there is no reason to believe that it resulted in any hardship as compared with other corporations engaged in the same business and similarly situated. Liability of the petitioner should be determined in conformity with .

Decision will be entered under Rule 50.