48 F.2d 686 | Ct. Cl. | 1931
The defendant has interposed a demurrer to the petition on the ground it does not state a cause of action against the United States. The petition alleges the plaintiff was affiliated with the Beneficial Loan Society, a Delaware corporation, and that from the time the plaintiff was incorporated (April 20, 1923) to May 1, 1925, the income of the plaintiff was shown in the consolidated return filed by the Beneficial Loan Society, the parent company; that the Beneficial Loan Society having disposed of the common voting stock of the plaintiff on May 1, 1925', the plaintiff could no longer include its income in the consolidated return, and was required to file an individual return (section 240 (e) and (d), Revenue Act of 1926 [26 USCA § 993 (c, d)]). An information return on Form 1122 was filed each year showing such consolidated return. Plaintiff filed its separate corporation income-tax return setting forth
Section 226 of the Revenue Act of 1926, 44 Stat. 38, 39 (26 USCA § 968), provides:
“See. 226. (a) If a taxpayer with the approval of the Commissioner changes the basis of computing net income from fiscal year to calendar year a separate return shall be made for the period between the close -of the last fiscal year for which return was made and the following December 31. If the change is from calendar year to fiscal year, a separate return shall be made for the period between the close of the last calendar year for .which return was made and, the date designated as the close of the fiscal' year. If the change is from one fiscal year to another fiscal year a separate return shall be made for the period between the close of the former fiscal year and the date designated as the close of the new fiscal year.
“(b) Where a separate return is so made, and in all other cases where a separate return is required or permitted, by regulations prescribed by the Commissioner with the approval of the Secretary, to be made for a fractional part of a year, then the income shall be computed on the basis of the period for which separate return is made. * * *
“(e) In the case of a return made for a fractional part of a year, except a return made under subdivision (a), the credits provided in subdivisions (e), (d), and (e) of section 216 shall be reduced respectively to amounts which bear the same ratio to the full credits provided in such subdivisions as the number of months in the period for which return is made bears to twelve months.”
Section 230 of the revenue act of 1926, 44 Stat. 39 (26 USCA § 981 note), provides for the tax on the net income of corporations in excess of the credits provided for in sections 236 to 263.
Section 239 (b) of the Revenue Aet of 1926, 44 Stat. 45 (26 USCA § 991), provides: “Returns made under this section shall be subject to the provisions of section 226. In the case of a return made for a fractional part of a year, except a return made under subdivision (a) of section 226, the credit provided in subdivision (b) of section 236 shall be reduced to an amount which bears the same ratio to the full credit therein provided as the number of months in the period for which the return is made bears to twelve months.”
The plaintiff contends the return made by it from May 1,1925, to January 31,1926, was its first return and therefore was a “taxable year,” and, being such, it is entitled to the full amount of the credit. But this contention is not true. The plaintiff was in existence for its entire fiscal year of twelve months ending January 31, 1926, and previous thereto. Until May 1, 1925, plaintiff was affiliated with another corporation and the consolidated return was the return of the plaintiff until the affiliation ceased, and this is true whether the consolidated return was filed by or in the name of another corporation as the parent company. It was the return of the plaintiff as much as if it had been a separate return. Each member of the affiliated group at all times retained its separate identity and was a separate taxpayer under the statute. The commissioner was required to assess against the plaintiff and collect from it its proportion of the tax computed upon the consolidated net income in proportion to the net income assignable to the plaintiff unless there existed an agreement among the corporations for a different apportionment or payment. The consolidated return from February 1 to April 30,1925, was therefore the plaintiff’s return for that
If the contention of the plaintiff were correct, it would receive the benefit of a specific credit in excess of the maximum of $2,-000 allowed.
During that portion of the fiscal year ended January 31, 1926, that plaintiff was included in the affiliated return it received the benefit of one specific exemption for the affiliated group; to again allow it the full specific credit for the remainder of the fiscal year, after termination of the affiliation, would be in direct violation of the statute.
The demurrer is sustained, and the petition is dismissed. It is so ordered.