1930 BTA LEXIS 1827 | B.T.A. | 1930
Lead Opinion
Three issues.are presented in this appeal, and we shall take them up in the order in which they are stated above.
In the first issue we are required to decide whether the cost of installing certain safety devices on the elevators in the office building
The contention of the petitioner in the second issue is that it should not be taxed as a business corporation. The basis of this claim is that for equitable reasons form should be disregarded since all of the capital stock is owned b.y one individual. It is settled,
The third issue is a question of allowable deductions of salary. The pertinent provisions of sections 234 (a) (1) of the Revenue Acts of 1921, 1924 and 1926 are the limitation of the deduction for salaries to reasonable allowances. The evidence shows that when the present sole stockholder acquired the stock of the petitioner the business was operating at a loss; this stockholder at once assumed the active management of affairs, devoting all of his time to the business, and through his ability, initiative and energy he was successful in establishing the business on a paying basis. We find no difficulty whatever in agreeing with the petitioner that his services were clearly of value to the petitioner. The respondent is also of that opinion as evidenced by his allowance uniformly, at a rate of $24,000 per annum, for all of the years of the deduction of a salary for the sole stockholder, who held the offices of president and treasurer. It is over the amount of the deduction that the parties are in disagreement.
The petitioner claimed in the returns it filed deductions larger in amount than the allowances of the respondent, and it now contends that it is entitled to the deduction in full of the salaries which are shown by the evidence to have been duly authorized respectively for the several years, arguing that the liabilities of the petitioner must be recognized in full; particularly with emphasis upon the claimed contractual liability for the year 1927 to pay over to the president-treasurer the remainder of the net profits after reserving an amount thereof computed at a rate of 6 per cent upon the par value of the capital stock. It is apparent, without discussion, that the petitioner ignores the express restrictions of the statutes to deductions in amounts which are reasonable; restrictions which may not be avoided. It is of no avail merely to show incur-rence of a contractual liability or to argue that the expense would be deductible were it not for the restriction. Marion Stone Burt Lansill et al., 17 B. T. A. 413.
After a careful consideration of all of the facts which are before us in this case, we are of opinion that the deductions allowed by the respondent for the salary of the president-treasurer are reasonable in amount and they are approved.
Judgment will he entered pursuant to Rule 50.