Gentry v. Commissioner

Memorandum Opinion

JOHNSON, Judge: In these consolidated proceedings respondent determined income tax deficiencies for the calendar year 1945 as follows:

The parties have entered into a stipulation which leaves for decision only the question of whether the Commissioner erred in failing to subtract from gross receipts, as cost of goods sold, the excess over the O.P.A. prices paid by petitioners for automobiles which they sold in their used car business.

[The Facts]

The stipulation of facts is adopted as the findings of fact.

Petitioners are individuals residing in Ft. Worth, Texas, and filed their income tax returns for the calendar year 1945 with the collector of internal revenue for the second district of Texas. Petitioners, Bruce E. and Katherine Gentry, are husband and wife and filed a joint return, while petitioner, I. A. Craig, filed a separate return. From January 1 to September 13, 1945, I. *329 A. Craig was engaged in the wholesale used automobile business as an individual, and from September 13 to December 31, 1945, I. A. Craig and Bruce E. Gentry were partners engaged in the wholesale used automobile business under the firm name of Craig & Gentry Motor Company. A partnership return was filed for the firm.

The gross receipts of I. A. Craig, operating as an individual, in 1945, amounted to $105,965.08, which sum was received by him from the sale of automobiles to his customers. He expended in the purchase of these automobiles the total sum of $91,876.08, of which amount $20,786.48 was paid in excess of the ceiling prices established by the O.P.A. law at that time.

The gross receipts of Graig & Gentry Motor Company, operating as a partnership, from September 13 to December 31, 1945, amounted to $83,374.97, received from the sale of automobiles to their customers. In the purchase of these automobiles the partnership expended the total sum of $75,078, of which amount an aggregate of $16,420, was paid by them in excess of the prices established by the O.P.A. law.

[Opinion]

Respondent contends that these sums paid by petitioners in excess of the O.P.A. prices may not*330 be included by them in computing the cost of the automobiles. This Court has passed upon that question adversely to respondent's contention in , to which holding we adhere. Respondent's action in denying inclusion of these amounts in computing the cost to petitioners of the automobiles is reversed.

It appears from the stipulation filed herein that in Docket No. 22649 petitioner I. A. Craig in his income tax return incorrectly reported the taxable income received by him in 1945, regardless of our decision on the issue here in dispute. He failed in his pleadings to allege error as to the 5 per cent negligence penalty determined against him by the Commissioner. Accordingly, the penalty will attach to the amount of deficiency herein determined as to him.

Decisions will be entered under Rule 50.