1931 BTA LEXIS 1715 | B.T.A. | 1931
Lead Opinion
The only issue for us to decide in this proceeding is whether the amount of income taxes paid to the French Government by the Armstrong Cork Company of France in the calendar year 1922 may be taken as a deduction from gross income in a consolidated return filed for 1923, the year in which the parent company claims it was first definitely notified that the payments had been made.
The pertinent provisions of the Eevenue Act of 1921 read as follows:
Seo. 324. (a) That in computing the net income of a corporation subject to the tax imposed by section 230 there shall be allowed as deductions;
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(3) Taxes paid or accrued within the taxable year except * * * (d) so much of the income, war-profits and excess-profits taxes imposed by the authority of any foreign country * * * as is allowed as a credit under section 238. * * *
Section 200 of the Eevenue Act of 1921 reads in part as follows:
That when used in this title—
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(4) The term “paid,” for the purpose of the deduction and credits under this title, means “ paid or accrued ” or “ paid or incurred,” and the terms “ paid or incurred ” and “ paid or accrued ” shall be construed according to the method of accounting upon the basis of which the net income is computed under section 212.
The Armstrong Cork Company and its subsidiaries kept their books and filed their returns for the years 1918 to 1923, inclusive, on an accrual basis of accounting, and the Commissioner accepted the
It is recognized, however, that particularly in a. business of any magnitude there are certain overlapping items both of income and deduction, and so long as these overlapping items do not materially distort the income they may be included in the year in which the taxpayer, pursuant to a. consistent policy, takes them into his accounts.
It seems clear to us that the above quoted regulation has no application to such a situation as we now have before us. Under authority of Aluminum Castings Co. v. Routzahn, supra, and United States v. Anderson, supra, we hold that respondent committed no error in refusing to allow petitioners to deduct, from consolidated gross income in 1923, taxes paid to the French Government in 1922 for the years 1918, 1919, and 1920. Accordingly, decision will be entered for respondent and the deficiency will be assessed against and collected from the parent corporation, Armstrong Cork Company, in accordance with the written agreement on file. Decision will be entered in Dockets 36395, 36396, 36397, 36398, and 36399, respectively, that there are no deficiencies.