1931 BTA LEXIS 1925 | B.T.A. | 1931
Lead Opinion
In respect to the first issue, we are convinced by the proof that the expenditures by petitioners for advertising the Ply
In respect to the second issue it appears that all three of these corporations filed separate returns for 1925 and 1926, this action being taken subsequent to the enactment of the Bevenue Act of 1926. For prior years they had filed consolidated returns. The action taken in 1925 and 1926 was voluntary and an exercise of the option provided by section 240 of the act in question. We hold that the determination by respondent of income for those years on the basis of such individual returns was proper. Alameda Investment Co. v. McLaughlin, 33 Fed. (2d) 120; Bowie Lumber Co., Ltd., 20 B. T. A. 342; Imperial Assurance Co., 19 B. T. A. 1068; Harbour-Longmire Co., 18 B. T. A. 33.
As to 1924 a different condition exists. For that year the three corporations filed a consolidated return and the sole question is whether or not they were in fact affiliated. Section 240 (c) (2) of the Bevenue Act of 1924 provides:
.For the purpose of this section two or more domestic corporations shall be deemed to be affiliated * * * (2) if at least 95 per centum of the voting stock of two or more corporations is owned by the same interests. * * *
The record shows that in such years all of the stock of these two petitioners, with the exception of one share in the Hennepin Holding Company, was owned by Hazen J. Burton, his wife, son and two daughters. We think it unquestionable that these two petitioners were affiliated through ownership by the “ same interests.” With respect to the Plymouth Clothing House, it is shown that of its 3,000 shares, 2,784 were owned by H. J. Burton, his wife and son, and that the stockholdings of the son were received by him from his father, encumbered with annuities in favor of the latter and of the recipient’s mother and two sisters. The ownership of this stock is, in our opinion, in the “ same interests ” owning the stock of the two petitioners. Of the balance of 216 shares it is shown that 134 shares
The basis of affiliation and the allowance of consolidation of income for tax purposes is actual unity of interest and in few of the cases considered by us has there existed the unity of control and operation here shown and in few such unity of interest. The prosperity of each concern was in large measure dependent upon the continued prosperous operation of the other two. The failure of one did not mean merely the probable loss by the Burton interests of their investment therein, but the probable loss of a large part of the investments in all three.
We hold that the two petitioners and the Plymouth Clothing House were affiliated in 1924, and the tax liability of petitioners should be computed on the basis of the consolidated return as filed for that year.
Reviewed by the Board.
Judgment will be entered fu/rsuant to Rule 50.