Pine Ridge Mines Co. v. Commissioner

*22 This is a proceeding for the redetermination of a deficiency in income and profits taxes for the calendar year 1920 in the amount of $5,838.41. The issues raised in the original petition were abandoned at the hearing and no evidence was offered thereon, leaving for decision here only one issue raised in an amendment to the petition, namely, whether respondent erred in failing to credit the petitioner with any part of the contribution made by it to the income and profits taxes paid upon the net income disclosed in the consolidated return filed by the petitioner and W. S. Bogle*1937 & Company, and Essanbee Mines Company for the year 1920, respondent having held that the petitioner was not affiliated with said companies during the taxable year.

FINDINGS OF FACT.

The petitioner is a corporation organized under the laws of the State of Indiana, with its principal office at Chicago, Ill. W. S. Bogle & Company and Essanbee Mines Company are also corporations organized under the laws of the same State and have their principal offices in the same city as petitioners. These three corporations filed a consolidated income and profits-tax return for the year 1920, showing consolidated net income of $154,151.08, of which $19,675.63 was net income of the petitioner. A total tax of $38,889.38 computed on said consolidated net income was paid by W. S. Bogle & Company as the parent or principal reporting corporation, of which amount the petitioner contributed $6,101.99.

With said consolidated return, the petitioner filed an "Information Return of Subsidiary or Affiliated Corporation," which contained the following statement.

7. The department prefers that the entire tax shown on a consolidated return be paid by the parent or principal reporting corporation, instead*1938 of being apportioned among the corporations composing the affiliated group. If apportionment is made, state the amount of income and profits taxes for the taxable period to be assessed against the subsidiary or affiliated corporation making this return.

In compliance with the above instruction, it was stated on the information return filed by the petitioner that "W. S. Bogle & Co. Inc. will pay total tax."

The consolidated return and the information returns of all three corporations were executed by Walter S. Bogle as president and Harry A. Stark as treasurer.

Respondent held that the petitioner was not affiliated with W. S. Bogle & Company and Essanbee Mines Company for the year 1920, and computed the tax liability of each corporation on an individual basis. The tax of W. S. Bogle & Company so recomputed was thereupon credited with the entire amount of $38,889.38 paid by said *23 corporation upon the consolidated net income of the three corporations, resulting in a refund to W. S. Bogle & Company in the amount of $3,499.58. The recomputation of the petitioner's tax liability on a separate basis resulted in the determination of the present deficiency of $5,838.41, *1939 which is the total tax so determined by the respondent to be due upon the net income of the petitioner for 1920, and against which respondent refused to allow as a credit any portion of the tax paid upon the consolidated net income of the three corporations above mentioned.

OPINION.

TRAMMELL: The sole issue for consideration here is whether or not the petitioner is entitled to a credit, against the amount of the deficiency determined by the respondent for 1920, in the amount of $6,101.99, being the amount contributed by the petitioner to the payment of the total tax of the three corporations shown on the consolidated return filed for the taxable year, under the circumstances disclosed in our findings of fact above.

These corporations were affiliated during the years 1917 and 1918, ; affd., , but respondent held that they were not affiliated during the taxable year 1920, and the correctness of that holding is not questioned by the petitioner in this proceeding. However, while not entitled to have their tax liability for 1920 computed upon a consolidated basis, these corporations were closely*1940 associated and apparently under the same management in said year, since the return of each was executed by W. S. Bogle, as president, and Harry A. Stark, as treasurer.

A consolidated return was filed for the taxable year, showing a total tax of $38,889.38, which was paid by W. S. Bogle & Company. Of this amount, the petitioner contributed $6,101.99. Upon audit of the consolidated return, the tax liability of each corporation was recomputed on a separate basis, and against the separate tax of the reporting corporation, that is, the corporation which paid to the Government the entire tax, respondent credited the $38,889.38 paid by that corporation upon the total net income shown on the consolidated return.

The petitioner claims that the respondent erred in so doing, and that it is entitled to have credited against its individual tax the amount contributed by it to the payment of the tax shown on the consolidated return. The petitioner argues that W. S. Bogle & Company, the principal reporting corporation, acted as agent for the subsidiaries in the payment of the total tax of the group.

We think there is no merit in the petitioner's contention. The respondent refunded or*1941 credited to W. S. Bogle & Company the *24 entire amount of the consolidated tax, including the contribution thereto of the petitioner, and if said corporation was the agent of the petitioner, as contended by it, payment of the money to its agent was payment to the petitioner. We think that the respondent correctly credited the entire amount to W. S. Bogle & Company. That corporation paid the amount to the Government upon the basis of a consolidated return. The information return filed by the petitioner stated that W. S. Bogle & Company would pay the entire tax. The petitioner, not having paid to the Government its tax liability, is not entitled to any credit in computing its tax liability for tax paid by another corporation. We think that the cases cited by the petitioner in its brief are distinguishable on their facts from the principle here involved.

For all the record discloses the Commissioner had no knowledge of any contributions made by the separate corporations to W. S. Bogle & Company, and we see no reason why he should inquire as to whether any other corporation made a contribution to the corporation paying the tax.

*1942 The petitioner did not make the payment to the Government and is not entitled to a credit therefor on a separate basis. Only the taxpayer which pays a tax to the Government can be said to be entitled to a credit when it is determined that such tax so paid exceeds the correct tax liability. See . It may well be, for all that the record discloses, that W. S. Bogle & Company has heretofore accounted to the petitioner for any portion of the tax overpaid to which it might have been entitled. The action of the respondent on this issue is approved.

Judgment will be entered for the respondent.