author: Maequette :

text:
    Mobile Delivery Co., Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 7124.
    Promulgated November 5, 1927.
    Tbe amounts involved herein distributed by the petitioner to its stockholders during the years 1918 to 1922, inclusive, held to be part of the purchase price of ice delivered to the petitioner by the stockholders, and not dividends.

      Wm. B. Pritchard, Esq., for the petitioner.

      M. N. Fisher, Esq., for the respondent.
    This proceeding is for the redetermination of deficiencies in income and profits taxes for the years 1918, 1919, 1920, 1921, and 1922, inclusive, in the total amount of $290,013.71. The issue is whether the income upon which the deficiencies are based belonged to thei petitioner or to four other companies which owned all of its capital stock.

      BINDINGS OB BACT.
    The petitioner is an Alabama corporation with its principal office and place of business at Mobile. It was during the years 1918 to 1922, inclusive, engaged in the business of selling ice at retail.
    For a number of years prior to April 19, 1916, the Weinacker Ice & Fuel Co., a corporation, the Mobile Brewery, a corporation, the City Ice Co., a corporation, and the Southern Ice & Fuel Co., a partnership, were competitors, separately engaged in the business of manufacturing and selling ice at Mobile. They maintained separate sales and delivery systems and equipment and covered the same retail delivery routes each day. Often the wagons of the four companies were seen delivering ice in the same block at the same time.
    In the early part of the year 1916 the business of manufacturing and selling ice was not profitable, and, at the suggestion of the president of a bank with which some of the companies dealt, a conference was held by and between the officers and managing agents of the four companies mentioned for the purpose of effecting economies in the business. At this conference it was agreed, after considerable discussion, that the four companies would organize a corporation to take over their delivery equipment and act as a consolidated sales agency for them. The four companies were to receive stock in the new corporation in proportion to their producing capacity and were to deliver ice to it in the same proportion — the corporation to make an initial payment of $2 per ton for all ice delivered and to distribute the remainder of the proceeds from sales, after deducting selling expenses, among the four corporations according to their respective stockholdings, such distribution to be additional payments for ice furnished by them. On April 19, 1916, in order to carry out the agreement reached at the conference, the following written contract was entered into by and between the four companies:
    State of Alabama,

      Mobile County.

    Whebeas, the undersigned parties are engaged in the manufacture of ice in the City of Mobile, Alabama, and each of the said parties maintains its own teams, delivery wagons and trucks for the delivery of ice throughout the City of Mobile and its vicinity; and,
    Whebeas, by following such course it is necessary for each of the parties hereto to keep up and maintain an expensive plant or establishment for making such deliveries; and,
    Whebeas, by forming a delivery company, as hereinafter provided, a large part of the expense incurred by each of the said parties in maintaining a separate plant for the delivery of its ice can be saved:
    Now, Thebefoee, This Instbument, Witnesseth, an agreement this day entered into by and between Weinacker Ice and Fuel Company, a corporation, hereinafter called Weinacker Company, William D. Martin, doing business under the firm name and style of Southern Ice and Fuel Company, hereinafter called Southern Company, Mobile Brewery, a corporation, and City Ice Company, a corporation, wherein and whereby the parties hereto, in consideration of the premises and the mutual promises herein contained, do agree each with the other as follows:
    Promptly after the execution of this agreement the parties hereto shall organize a corporation to be known as “ Mobile Delivery Company,” with a total authorized capital stock of $20,000, all of which shall be fully paid for, divided into two hundred (200) shares of the par value of $100 each, the Weinacker Company hereby agreeing to subscribe for 46 shares of the capital stock of said corporation, the Southern Company for 51% shares, the Mobile Brewery for 51% shares, and the City Ice Company for 51% shares. Each of the said subscribers shall reserve the right to discharge their subscription to the capital stock of the said Mobile Delivery Company by conveying to the said company such part of the mules, horses, wagons and trucks which are now used by the said respective parties in the delivery of ice in Mobile County, Alabama, as taken at its fair value is reasonably worth the amount of the respective stock subscriptions hereinabove provided to be made by each of the said parties. Should the parties hereto so desire, the said corporation may be formed by such other persons as they may direct, and certificates of stock issued to such other persons shall be forthwith transferred on the books of the said corporation to the parties hereto so that their holdings in the stock of the said corporation shall be in the proportions hereinabove provided. The said Mobile Delivery Company shall have four directors, one of the said directors being selected from among the officers of each of the four parties hereto. The by-laws of the said Mobile Delivery Company shall particularly provide that the entire management of the Company shall be vested in the Board of Directors and shall provide for a meeting of the Board of Directors for a period of one hour each working day except when the Board of Directors should deem it unnecessary to hold such frequent meetings. The said by-laws shall further provide that the term of the President of said corporation shall be for one month, and it is agreed between the parties hereto that some officer of each of said parties, in rotation, shall hold the same office of President, it being further agreed that some officer of the Mobile Brewery shall be President for the first month, an officer of the City Ice Company for the second month, an officer of the Wein-acker Ice and Fuel Company for the third month, and an officer of the Southern lee & Fuel Company for the fourth month, and continuing thus in rotation, it being contemplated and agreed that no President shall hold office for more than one month consecutively, and that an officer of each of the parties hereto shall hold the Presidency of said Mobile Delivery Company for one month out of every four months.
    The parties hereto agree to deliver their entire output of ice to the said Mobile Delivery Company for a period of four years from this date, unless the said Mobile Delivery Company should be dissolved before the expiration of such time, it being agreed and understood that this contract shall be in full force and effect for such period of four years.
    Beginning immediately after the formation of the Mobile Delivery Company, The Weinacker Company shall commence to manufacture ice, and shall each day manufacture such amount not exceeding ninety tons per day as may be necessary to supply the demands of the said Mobile Delivery Company. The said Weinacker Company shall continue to operate its ice plant until it has furnished to the said Mobile Delivery Company a total of 6,900 tons of ice, and it shall then cease operations until such time as it shall begin to deliver ice to the said Mobile Delivery Company as hereinafter provided. As soon as the demand for ice has reached that stage where the said Weinacker Company is unable to supply the demand, or as soon as the demand of the said Mobile Delivery Company for ice is more than the output of the said Weinacker Company, the said Southern Company shall commence to manufacture ice and shall each day furnish to the Mobile Delivery Company such amount as may be necessary to make up the total demand of the said Mobile Delivery Company after deducting therefrom the ice delivered to said Mobile Delivery Company by the said Weinacker Company. The said Southern Company shall continue to furnish ice to the said Mobile Delivery Copipany until it has furnished a total of 15,400 tons and shall then cease making ice until it shall resume operations as hereinafter provided. When the said Southern Company has delivered to the said Mobile Delivery Company, a total of 15,400 tons, or whenever the demand of the said Mobile Delivery Company for ice exceeds the amount which it is to receive from the said Weinacker Company and the said Southern Company, as hereinabove provided, then the Mobñe Brewery shall commence to manufacture ice for said Mobile Delivery Company, and shall continue delivery to the said Mobile Delivery Company such amount of ice each day as, taken together with the output of the Weinacker Company and the Southern Company, may be necessary to make up the total demand for ice of the said Mobile Delivery Company. The said Mobile Brewery shall continue manufacturing and delivering ice to the said Mobile Delivery Company until such time as it has delivered a total of 15,400 tons of ice to the said Mobile Delivery Company, and it shall then cease to manufacture ice until it shall resume operations as hereinafter provided.
    When the said Mobile Brewery has delivered to the said Mobile Delivery Company a total of 15,400 tons of ice, or whenever the demand of the said Mobile Delivery Company for ice exceeds the amount which it is to receive from the said Weinacker Company, the said Southern Company and the said Mobile Brewery, as hereinabove provided, then the City Ice Company shall commence to manufacture ice for said Mobile Delivery Company, and shall continue delivering to the said Mobile Delivery Company such amount of ice each day as, taken together with the output of the other parties, as hereinabove provided, may be necessary to make up the total demand for ice of the said Mobile Delivery Company. The said City Ice Company shall continue manufacturing and delivering ice to the said Mobile Delivery Company until such time as it has delivered a total of 15,400 tons of ice to the said Mobile Delivery Company, and it shall then cease to manufacture ice until it shall resume operations as hereinafter provided.
    When the said City Ice Company has delivered to the said Mobile Delivery Company a total of 15,400 tons of ice, or whenever the demand of the said Mobile Delivery Company for ice exceeds the amount which it is to receive from the other parties hereto, as hereinabove provided, then the said Weinacker Company shall resume the manufacture of ice for the said Mobile Delivery Company, and shall continue delivering to the said Mobile Delivery Company such amount of ice each day as, taken together with the output of the other parties hereto, as hereinabove provided, may be necessary to make up the total demand for ice of the said Mobile Delivery Company. The said Weinacker Company shall continue manufacturing and delivering ice to the said Mobile Delivery Company until such time as it has delivered 6,900 tons of ice to the said Mobile Delivery Company, in addition to the 6,900 tons of ice which it is to deliver immediately after the commencement of operations hereunder, as hereinabove provided, making a total of 13,800 tons of ice. When the said Weinacker Company has delivered this additional 6,900 tons of ice, it shall cease to manufacture ice until it shall resume operations as hereinafter provided.
    It is contemplated between the parties hereto that in making deliveries of ice to the Mobile Delivery Company under this agreement, the Weinacker Company will deliver 13,800 tons of ice to every 15,400 tons of ice delivered by each of the other parties hereto, and when the amount of ice as herein-above provided has been delivered, the parties hereto shall continue delivering ice to the said Mobile Delivery Company in the same manner, and in the same amounts, and on the same terms, as hereinabove provided for each, it being contemplated that the deliveries hereinabove specifically provided for will take approximately one year, except that for the second year the Southern Ice & Fuel Company shall first deliver one-half of its annual output of approximately 15,400 tons at the beginning of the season, and the remaining half at the end of the season, the deliveries being the same as during the first year with the exception’ that the Southern Ice & Fuel Company shall take the place of the said Weinacker Company, though the deliveries by the respective parties shall aggregate the same number of tons for the second year as for the first year. The deliveries of ice hereunder for the third year shall be the same as for the first year, with the exception that the Mobile Brewery shall take the place of the said Weinacker Company and deliver one-half of its annual production at the beginning of the season and one-half at the end of the season. For the fourth year, the deliveries of ice hereunder shall be the same as for the first year, with the exception that the said City Ice Company shall take the place of the said Weinacker Company and deliver one-half of its annual production at the beginning of the season and one-half at the end of the season. The schedule of deliveries shall be as follows:
    1st year
    Weinacker (split)
    Southern
    Brewery
    City
    2nd year
    Southern (split)
    Brewery
    City
    Weinacker
    3rd year
    Brewery (split) City
    Weinacker
    Southern
    4th year City (split) Weinacker Southern Brewery
    It is expressly agreed and understood that the parties hereto shall only operate their ice plants during the periods as hereinabove provided, so long as this contract is in force, and shall only manufacture such ice as is delivered under the terms hereof to the said Mobile Delivery Company. It is also further expressly agreed that at no time shall the said Weinacker Company manufacture more than 90 tons of ice per day, nor shall any of the other parties hereto manufacture more than 100 tons of ice per day, unless such further manufacture is expressly requested, in writing, by the Board of Directors of said Mobile Delivery Company.
    It is expressly stipulated and agreed that all of the deliveries to the said Mobile Delivery Company hereinabove provided to be made by the parties hereto, shall be made to the store rooms of the respective plants conducted by the parties hereto, it being understood that such deliveries shall be for the account of the said Mobile Delivery Company, and it being contemplated that the said Mobile Delivery Company will call for and receive the said ice at the store rooms of the respective parties. The store rooms of each of said parties shall be used by, and be under the control of, said Mobile Delivery Company, and all expense of labor for handling ice shall be borne by the said Mobile Delivery Company.
    It is further agreed that Mr. Henry A. Horst will be elected Secretary and Treasurer of the said Mobile Delivery Company for a period of one year, and from time to time thereafter should the Board of Directors of the said Mobile Delivery Company see fit to re-elect him, and that his salary shall be $1L® per month. Mr. Walter P. Martin shall be elected auditor of the said delivery company for a period of one year, and from time to time thereafter should the Board of Directors see fit to re-elect him, and his salary shall be $150 per month. Mr. John B. Cronin shall be elected Superintendent of the Mobile Delivery Company for a period of one year, and from time to time thereafter should the Board of Directors of the said Mobile Delivery Company see fit to re-elect him, and shall have general charge of the receiving and delivering of ice uuder the terms of this contract, and his salary shall be $200 per month. Mr. C. J. Weinacker shall be elected Assistant Superintendent of said Mobile Delivery Company for a period of one year, and from time to time thereafter should the Board of Directors of said Mobile Delivery Company see fit to re-elect him, and his salary shall be $100 per month.
    The Mobile Delivery Company shall pay to each of the parties hereto $2 per ton for each and every ton of ice furnished to the said Mobile Delivery Company by the parties hereto under the terms of this agreement, such amount to be paid weekly on Tuesday of each week for all ice delivered to said Mobile Delivery Company during the preceding week, provided the treasury of the said Mobile Delivery Company is in shape for making such payments, and in event there is not sufficient amount of cash an hand to make such payments each Tuesday, the said Mobile Delivery Company, shall, each Tuesday pay over to the respective parties hereto, pro-rata according to the amount of ice furnished by them the amount of cash then on hand, with the exception of such part of the said cash as it may be necessary for the said Mobile Delivery Company to retain for office and other expenses.
    Whenever the Board of Directors is of the opinion that one of the above named ice manufacturing companies which is then enjoying the privilege of running up to the maximum capacity hereinabove allowed to it will not furnish" sufficient ice for the purposes of the Delivery Company, the said Board of Directors may order the manufacturing- company which then has the second right to manufacture to hold itself in readiness to begin such manufacture and to in fact manufacture such amount of ice as may be needed, and to this end such second company may be ordered to keep its tanks frozen down, and the delivery company shall pay the loss and expenses of so doing, such loss and expenses, however, to include only the following items, namely: The salary and wages of engineers and other necessary employees, the expense of ammonia, fuel and lubricating oil. No other expenses of any other kind or character shall be allowed or paid by the Delivery Company. However, the expenses so allowed shall be the same amount per ton to each of the said four plants.
    Whenever the Board of Directors is of the opinion that it is no longer necessary to maintain a plant so frozen down, it shall order the owner of that plant to strip it, and the making company shall take and accept the agreed price for the ice drawn in so stripping the plant.
    The word “ ton ” wherever the same is hereinabove used, shall be understood as meaning 2,000 pounds.
    All ice furnished to the said Delivery Company shall be of a merchantable quality, and in case of any dispute the Board of Directors of said Delivery Company shall be the arbiters.
    Should there be a tie vote, in the Board of Directors, on any proposition, the said Board shall call in an umpire and his decision shall be final.
    In case of the destruction by fire of the plant of any of the parties hereto, the same must be rebuilt by the owner within six months from such destruction.

      Each of the parties hereto will pay the Mobile Delivery Company for their respective tickets redeemed by the Mobile Delivery Company at the general rate fixed by the Board of Directors of said Delivery Company.
    Some time subsequent to April 19, 1916, the initial payment of $2 per ton was, on account of the increased cost of labor and fuel, changed to $3.40 per ton. These initial payments wer'e not intended to be in full payment for ice delivered, but were cash advancements to enable the weaker companies to operate.
    Pursuant to the agreement made by the four companies the petitioner was incorporated on or about April 17, 1916, with a capital stock of $20,000, divided into 200 shares of the par value of $190 each. The capital stock was issued to an officer of the Weinackér Ice & Fuel Co., an officer of the City Ice & Fuel Co., an officer of the Mobile Brewery, and to W. D. Martin of the Southern Ice & Fuel Co., as trustees for the several companies, in the amounts of 46 shares, 511/3 shares, 5iys shares, and 51 ys shares respectively, and each of the companies paid into the petitioner delivery equipment equal in value to the par value of the stock received by it. No stock was issued for cash and none was ever transferred or sold from the date the petitioner was organized through the years involved herein.
    Ice was delivered to the petitioner during the years 1916 to 1922, inclusive, by the four companies mentioned, for which they were paid the initial payment provided for, and, after the ice had been sold by the petitioner and expenses of sales and delivery paid, the balance of the proceeds was distributed to the four companies in proportion to their stockholdings in the petitioner. These distributions were made weekly during the summer months and at less frequent intervals during the winter. All money in the hands of the petitioner was deposited in banks and could be drawn but only by checks signed by all four of its directors. Deliveries of ice wer'e not made by the companies during the years 1916 to 1922, inclusive, in exact proportion to their stockholdings in the petitioner and the requirements of the contract of April 19, 1916, and this disproportion in delivery was never adjusted either by additional deliveries or by changing the distributions to conform to the amounts of ice actually delivered. The tonnage of ice delivered by any of the four companies did not for the seven years mentioned vary more than 2y2 per cent from its requirements under the contract.
    During the year 1916 and until June, 1917, the distributions mentioned were denominated “ dividends ” in the minutes of the petitioner board of directors and they were so denominated and repoi’ted in the petitioner’s income-tax return of 1916. However, in the early part of 1917 the petitioner’s book-keeper was advised that it was not the intention of the petitioner to pay any dividends; that the distributions made to the stockholders were additional payments for ice, and that they had been wrongly denominated in the minutes of the board of directors and in the income-tax return for 1916. No dividend was ever declared by the petitioner, and its stockholders at all times considered the distributions mentioned as additional payments for ice delivered by them to the petitioner, and they were so entered on their books and treated for purposes of taxation.
    The cost of manufacturing the ice delivered to the petitioner during the years 1916 to 1922, inclusive, was in excess of $2 per ton and in several of those years was more than $3.50 per ton.
    The petitioner in its income and profits-tax returns for the years 1918 to 1922, inclusive, treated the payments made to its stockholders, as above set forth, as part of the purchase price of ice delivered by them, and deducted the amount thereof as part of the cost of ice sold. The respondent determined that the distributions were not part of the cost of ice delivered to the petitioner, but that they were income to the petitioner and dividends to the stockholders, and he asserted deficiencies in tax in the amounts of $85,346.89 for 1918, $79,151.60 for 1919, $56,095.10 for 1920, $62,168.72 for 1921, and $7,251.40 for 1922.
   OPINION.

Maequette :

This controversy particularly involves the payments made by the petitioner to its four stockholders in excess of the amount of $2 or $3.50 per ton specifically paid them for ice delivered under the original contract of April 19, 1916, and the contract as modified. The petitioner contends that the payments of $2 or $3.50 per ton were not intended to be in full payment for ice delivered by the stockholders, but were merely advances to assist the stockholders in taking care of their operating expenses, and that the remainder of the proceeds realized from the sale of ice, less selling costs, belonged to the stockholders as additional payments for ice furnished by them. It is the contention of the respondent that the payments of $2 or $3.50 per ton were and were intended to be the purchase price of the ice delivered by the stockholders and that the other payments or distributions represented earnings and income of the petitioner and dividends to the stockholders.

The evidence presented at the hearing is voluminous, and it is not necessary to set it forth in detail here. The material part thereof, briefly summarized, shows that prior to April, 1916, the four companies that constitute the petitioner’s stockholders were competing in the manufacture and sale of ice at Mobile, each maintaining separate sales and delivery equipment. The ice business was at that time in an unprofitable state and at the suggestion of a banker with whom some of the companies dealt, their representatives held a conference to devise means of effecting economies in the business. It was finally agreed that they would form a consolidated sales agency to handle the output of the four companies, thus obviating the duplication of sales and delivery equipment. At first it was not thought that it would be necessary to form a corporation, but some of the persons interested were distrustful of the others, and the question of management and liability for accidents arose, as well as the question of bringing suits to collect accounts, and it was decided that the delivery company should be incorporated, the capital stock thereof to be allotted to the four manufacturing companies in proportion to their producing capacity and to be paid for with delivery equipment equal in value to the par value of the stock. It was also suggested that the manufacturing companies deliver their output to the delivery company without receiving any advance payment, but, as some of the weaker companies needed money to take care of their operating expenses, it was finally agreed that the delivery company would make an advance payment of $2 per ton, subsequently changed to $3.50 per ton, and that the balance of the proceeds from sales after deducting the cost of selling would be distributed among the stockholders in proportion to the stockholdings and deliveries of ice, it being intended that stockholdings and deliveries should be in the same ratio. On April 19, 1916, the written contract set forth in the findings of fact was executed by the four companies for the purpose of carrying the oral understanding or agreement into effect. At or about the same time the petitioner was incorporated with a capital stock of $20,000, which was distributed among the four companies, in exchange for delivery equipment equal in value to the par value of the stock and in proportion to their producing capacity and the amounts of ice they were to deliver to the petitioner under the contract. The petitioner handled from the time it was organized the entire output of the four manufacturing companies, and paid them the specific amount per ton provided by the contract, and also distributed to them at intervals, usually weekly in the summer months and less frequently in the winter, all the proceeds from sales, less selling costs. These distributions were not made in the exact proportions in which the companies were required to deliver ice under the contract, which was also in proportion to their stockholdings in the petitioner, but were made regardless of whether the full quota had been delivered.

The respondent urges that as the distributions were always in proportion to the stockholdings and not in exact proportion to actual deliveries of ice they show that they were dividends and not payments for ice. We do not however think that fact is necessarily controlling, It is true that the distributions were exactly in proportion to the stockholdings, but they in turn were in the same proportions as the amounts of ice the stockholders were to deliver to the petitioner under the contract, and it was, as the evidence shows, the capacity of the several plants and the amounts of ice to be delivered that determined the interests the four companies were allotted in the petitioner. By the contract it was provided that, in order to obviate the operating all of the plants concurrently, each plant should operate part time until they had produced their proportionate amounts. It was therefore obviously impossible that at all times the production of the four plants would be in the proportions contemplated by the contract, but it was intended that it would be equalized over the period of the ice year which began on April 1 of the calendar year. We do not attach any particular importance to the fact that over the years involved herein there was some disproportion in deliveries which was never equalized. It simply results in the fact that over a period of years, despite the intent of the contract, one or more of the companies received, in the practical carrying out of the contract, a little more and the others a little less for their ice than was contemplated.

The respondent also urges that the petitioner treated the distributions in question as “ dividend ” on the minutes of the meetings of the board of directors, and in its income-tax return for 1916, and that they were in fact dividends. The evidence however shows that they were so treated by the petitioner’s bookkeeper and treasurer, and that shortly after the close of the year 1916 he was informed by the stockholders that such treatment was erroneous; that the petitioner had not made any dividend; that the intention and purpose of the agreement was that any money over and above expenses of delivery and the initial payment of $2 per ton was an additional payment for ice, and entered into the ice purchase accounts on the petitioner’s books.

It is also contended by the respondent that if we give to the contract of April 19, 1916, the construction contended for by the petitioner it would be in violation of the anti-trust laws of Alabama. In our opinion that question has no bearing on this case. Conceding, for the purpose of this opinion only, that in making the contract of April 19, 1916, and in forming the petitioner corporation the four manufacturing companies did so in contravention of law, it can not change the fact that the petitioner engaged in business for a number of years, or transform into dividends payments actually intended and made for ice furnished it. Furthermore we are unable to perceive how it would be any the less a violation of law for the several companies to control the petitioner and receive its profit as dividends than for them to sell it their product in the manner in which they did.

The respondent also points out that the petitioner was not a party to the contract of April 19, 1916, and that we should attach no importance to it. That argument presents no difficulties. It is sufficient to say that the petitioner was a creature of the four companies that organized it pursuant to the contract, and that it was in fact, if not in law, as firmly bound and controlled by the contract as if it had been a party thereto.

In the light of the evidence in this proceeding we are impelled to the conclusion that the petitioner was organized, not as a corporation to engage in business independently for the purpose of profit, but that it was and was intended to be a selling agency for the four companies which owned its capital stock, and that all proceeds from sales in excess of the initial payments for ice and the cost of selling were additional payments for ice, as contended by the petitioner. The contract is'clearly susceptible of that construction and has at all times been so construed by the parties thereto.

Eeviewed by the Board.

Judgment will he entered on 15 days' notice, u/nder Rule SO.


source: Caselaw Access Project

author: MoRRis:

license: Public Domain

text:
    W. C. Harris, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 21060.
    Promulgated November 5, 1927.
    Tbe loss sustained by tbe petitioner in 1921 as tbe result of tbe liquidation of a corporation carrying on business formerly operated by petitioner and another -as a partnership, and after dissolution, operated by him as an individual, was not a “ net loss ” as defined in section 204 (a) of the Revenue Act of 1921.

      B. M. Webster, Esq., for the petitioner.

      P. J. Rose, Esq., for the respondent.
    The Commissioner determined a deficiency in income tax for the year 1923 in the amount of $497.68. Petitioner claims that Commissioner erred in refusing to treat a loss of $24,491.86 as a “ net loss ” under the Revenue Act of 1921.
    FINDINGS OP FACT.
    Petitioner is a citizen and resident of Sterling, Colo., and had been engaged in the cattle business at that place since about 1893. Together with Healy he formed the Healy-Harris Corporation in 1915. That company had a paid-up capital of $560,000, divided equally between the petitioner and Healy, and issued in exchange for live stock, machinery and land. The petitioner’s contribution to the capital of the corporation constituted everything that he had except bis residence and life insurance. After the incorporation, a nephew of the petitioner became a stockholder to the extent of 15 per cent, turning over certain personal property in exchange for the stock. Smith, the secretary of the company and the son-in-law of Healy, similarly became the owner of 15 per cent.
    Prior to the formation of the corporation the copartnership of Healy and Harris had been carried on with the same assets, but with the advance in years of Healy, the corporation was formed to facilitate liquidation in case of the death of either partner. The petitioner was the actual manager of the business of the corporation, spent his entire time with it and had no other business. At the death of Healy in 1919, steps were taken to dissolve the corporation and it was about two years before the liquidation was completed.
    There was no substantial difference in the manner of operation of the corporation and the predecessor partnership. The petitioner continued to act as manager of the business, the corporation borrowed money from the same banks and handled it in the same manner, the petitioner, as an individual, endorsing the notes for everything, or practically everything, that was borrowed. The corporation had the same offices as the partnership and the general public did not recognize the difference in the manner of operation and did not know that the partnership had become a corporation or when it ceased to do business as a corporation and again became a partnership.
    The banks dealing with the corporation dealt with it because of the personal responsibility of the petitioner and Healy. The Healy - Harris Co. was dissolved in the year 1921. On its liquidation the petitioner suffered a loss in the amount of $24,491.86. The deficiency in tax results from the disallowance of any portion of such amount as a “ net loss ” against income of the petitioner for the year 1923.
   OPINION.

MoRRis:

The question raised by the petitioner has already been considered by the Board and decided adversely to his contention. Harry J. Gutman v. Commissioner, 7 B. T. A. 500; H. E. Newton v. Commissioner, 7 B. T. A. 1153; R. J. Palmer v. Commissioner, 4 B. T. A. 1028; Wm. J. Robb v. Commissioner, 5 B. T. A. 827. In view of those decisions we are of the opinion that the loss sustained by the petitioner in 1921 upon the liquidation of the Healy-Harris Co. was not a “ net loss ” as defined in section 204 (a) of the Revenue Act of 1921.

Reviewed by the Board.

Judgment will be entered for the respondent.


author: Siefkin:

text:
    Freeland Cattle Co., Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 9518.
    Promulgated November 5, 1927.
    Evidence held, to show error in respondent’s inventory adjustments.

      E. B. Henderson, Jr., Esq., for the petitioner.

      P. J. Rose, Esq., for the respondent.
   Siefkin:

This is a proceeding for the redetermination of a deficiency in income tax of $209.80 for the year 1922, and results from an increase in capital inventories. The petitioner, during the year 1922, was a Wyoming corporation engaged in ranching and cattle raising. On August 28, 1922, it bought 3 head of cattle for $240; on October 5, 1922, 3 head for $100; and on October 24, 1922, 106 head for $3,339.10, a total cost of $3,679.10. Between the time of the purchase of such cattle and December 31, 1922, their market price did not increase. The cattle so purchased were erroneously included in the inventory of the petitioner on December 31, 1922, at a total price of $5,365. The Commissioner increased the petitioner’s inventory on December 31,1922, on account of such cattle, by including them at a total of $6,155.

The cost of $3,679.10 for the 112 head was also their market value on December 31, 1922. Such cattle should be included in inventory as of that date at $3,679.10 instead of the amount of $5,365 at which they were priced by petitioner, or $6,155 as priced by respondent.

Reviewed by the Board.

Judgment will he entered for the petitioner on 15 days' notice, under Rule 50.


author: Momas:

text:
    Bamberg Cotton Mills Co., Dissolved, by Santee Mills, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket Nos. 9445, 10104.
    Promulgated November 5, 1927.
    More than 5 years having expired since the filing of income and excess-profits-tax returns for the fiscal years 1917 and 1920 and no valid consent to an extension of tbe period of limitation having been entered into between respondent and taxpayer, held, the assessment of tax for the fiscal years 1917 and 1920 is barred by the statute of limitations.

      G. E. H. Goodner, Esq., for the petitioner.

      J. E. Marshall, Esq., for the respondent.

      This is a proceeding for the redetermination of deficiencies in income and profits taxes for the fiscal years ended August 31, 1917, and June 30, 1920, in the amounts of $2,440.83 and $9,273.09, respectively. The questions raised by the pleadings are:
    (1) Whether the proposed assessments for the periods ended August 31, 1917, and June 30, 1920, are barred by the statute of limitations.
    (2) Whether the respondent has erroneously understated the invested capital of the petitioner for the fiscal periods ended August 31, 1917, and June 30,1920.
    (3) Whether the respondent has erroneously computed the 4 per cent additional income tax levied under section 4 of the Eevenue Act of 1917 in determining the tax for the fiscal year ended August 81, 1917.
    This case came on for hearing on February 7, 1927, at which time it was on motion of counsel ordered that the appeals for the years 1917 and 1920, Docket Nos. 9445 and 10104, be consolidated for hearing. No oral testimony was offered at the hearing by either the petitioner or the respondent. The case was submitted on documentary evidence and stipulations entered into by counsel.
    FINDINGS OF FACT.
    Petitioner (Bamberg Cotton Mills Co.) was organized and incorporated under the laws of the State of South Carolina in 1903, to engage in the cotton-mill business at Bamberg. It was dissolved on May 14,1920, in accordance with the laws of that State and its assets were distributed to the Santee Mills, a corporation then existing under the laws of the State of South Carolina, which corporation owned all of the stock of the petitioner at the time of said dissolution. Upon acquisition of the assets of the petitioner, the Santee Mills at the same time assumed all of its liabilities and obligations.
    The Bamberg Cotton Mills, predecessor of the petitioner, also engaged in the cotton-mill business, petitioned the court on December 2, 1902, for the appointment of a receiver and in 1903 said receiver was appointed. The balance sheet of that company at that time was as follows:
    Assets:
    Machinery, buildings and real estate_$182, 076. 01
    Other assets_ 26,281.95
    Deficit- 11, 531.02
    219, 888. 98
    Liabilities:
    Capital stock- 137, 990. 00
    Bills payable and interest_ 78,277.02
    Accounts payable_ 3, 621.96
    219, 888.98

      In 1903, when the petitioner was organized, the stockholders thereof were composed in part of the stockholders and creditors of the old company. At the receiver’s- sale either the petitioner or the subscribers to its stock purchased the entire assets of the old company for the sum of $50,000, of which sum $38,982.21 represented machinery, buildings, etc. In 1906, petitioner experienced a disastrous fire which destroyed its records.
    Petitioner filed its income-tax return for the year ended August 31, 1917, with the collector of internal revenue, district of South Carolina, on October 11, 1917.
    Petitioner filed its income and profits-tax return for the fiscal period July 1, 1919, to May 14, 1920, with the collector of internal revenue, district of South Carolina, on September 7, 1920.
    The following consents in writing were filed in connection with this case for the years 1917 and 1920, as follows:
    New York, January —, 1923.
    Special Assignment Section.
    Income and Profits Tax Waiver
    In pursuance of tlie provisions of subdivision (d) of Section 260 of the Revenue Act of 1921, Santee Mills, the successor to Bamberg Cotton Mills Co., of Bamberg, South Carolina, and the Commissioner of Internal Revenue hereby consent to a determination, assessment and collection of the amount of income, excess profits or war profits taxes due under any return made by or on behalf of said Bamberg Cotton Mills Co., of which said Santee Mills is the successor, for the year 1917 under the Revenue Act of 1921 or under prior income, excess profits or war profits tax Acts or under Section 38 of the Act entitled “An Act to provide revenue, equalize duties and encourage the industries of the United States, and for other purposes”, approved August 6, 1909, irrespective of any period of limitations.

    (Date)
    (Sgd) D. H. Blair,
    a.

      Commissioner of Internal Revenue.

      As amended 1924 IT :CA 2336-6
    November 10, 1924. (Date)
    Received Nov. 19, 1924 Special Assessment Section Section 23
    Income and Profits Tax Waiver
    In pursuance of the provisions of existing Internal Revenue Laws, Bamberg Ootion Mills (nmo Santee Mills) a taxpayer, of Bamberg, S. O., and the Commissioner of Internal Revenue, hereby consent to extend the period prescribed by law for a determination, assessment, and collection of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of said taxpayer for the years ended August 31, 1917, under the Revenue Act of 1924, or under prior income, excess-profits, or war-profits tax Acts, or under Section 38 of the Act entitled “An Act to provide revenue, equalize duties, and encourage the industries of the United States, and for other purposes ”, approved August 5, 1909. This waiver is in effect from the date it is signed by the taxpayer and will remain in effect for a period of one year after the expiration of the statutory period of limitation within which assessments of taxes may be made for the year or years mentioned, or the statutory period of limitation as extended by Section 277 (b) of the Revenue Act of 1924, or by any waivers already on file with the Bureau.
    (Seal)
    Santee Mills Incorporated 1917
    Orangeburg, S. C.
    Santee Mills,

      Taxpayer.

    By Prank E. Whitman (Sgd), Treasurer.

    D. H. Blair (Sgd),

      Commissioner.

    If this waiver is executed on behalf of a corporation, it must be signed by such officer or officers of the corporation as are empowered under the laws of the State in which the corporation is located to sign for the corporation, in addition to which, the seal, if any, of the corporation must be affixed.
    (A 5)
    January, 28, 1925. Received Jan. 31,1925 Special Assessment Section
    Income and Profits Tax Waiver
    IT: E: SM
    HAL-18848
    A-18849
    (For taxable years ended prior to March 1, 1921)
    In pursuance of the provisions of existing Internal Revenue Laws Bamberg Cotton Mill, {Now Santee Mills), a taxpayer of Bamberg, South Carolina, and the Commissioner of Internal Revenue hereby waive the time prescribed by law for mating any assessment of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of said taxpayer for the fiscal year 1917 under existing revenue acts, or under prior revenue acts. This waiver of the time for making any assessment as aforesaid shall remain in effect until December 31, 1926, and shall then expire except that if a notice of deficiency in tax is sent to said taxpayer by registered mail before said date and (1) no appeal is filed therefrom with the United States Board of Tax Appeals then said date shall be extended sixty days, or (2) if an appeal is filed with said Board then said date shall be extended by the number of days between the date of mailing of said notice of deficiency and the date of final decision by said Board.
    Bamberg Cotton Mel

      {Now Santee Mills)
    (Seal)
    Santee Mills Incorporated 1917
    Orangeburg, S. 0.

      Taxpayer.

    By Martin J. Keogh, Jr. (Sgd)

      Vice-President. J. E. Bullagar, Secty.

    D. H. Blair,

      Commissioner.

    If this waiver is executed on behalf of a corporation, it must be signed by such officer or officers of the corporation as are empowered under the laws of the State in which the corporation is located to sign for the corporation, in addition to which, the seal, if any, of the corporation must be affixed.
    (A 3)
    Income and Profits Tax Waiver
    Bor taxable years ended prior to January 1, 1922
    IT. E. SM Received
    HWG-C-21500-2 August 26, 1925
    Special Assessment Section
    August 22, 1925.
    In pursuance of the provisions of existing Internal Revenue Laws, Santee Mills, Successors to Bamberg Cotton Mills Company, a taxpayer of Baniberg, South Carolina, and the Commissioner of Internal Revenue hereby waive the time prescribed by law for making any assessment of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of said taxpayer for the fiscal year ended June 30, 1920 under existing revenue acts, or under prior revenue acts.
    This waiver of the time for making any assessments as aforesaid shall remain in effect until December 31, 1926, and shall then expire except that if a notice of a deficiency in tax is sent to said taxpayer by registered mail before said date and (1) no appeal is filed therefrom with the United States Board of Tax Appeals then said date shall be extended sixty days, or (2) if an appeal is filed with said Board then said date shall be extended by the number of days between the date of mailing of said notice of deficiency and the date of final decision by said Board.
    seal) Santee Mills,
    Santee Mills (Successors to Bamberg Cotton Mills Company)
    Incorporated Taxpayer.

    1917 By Martin J. Keogh, Jr. (Sgd)
    Orangeburg, S. C. Vice-President.

    D. H. Blair, w. B.

      Commissioner.

      If this waiver is executed on behalf of a corporation, it must be signed by such officer or officers of the corporation as are empowered under the laws of the State in which the corporation is located to sign for the corporation, in addition to which, the seal, if any, of the corporation must be affixed.
    J. O. b 12.
    On October 20, 1925, the respondent mailed a deficiency notice to the petitioner with respect to the fiscal year ended August 31, 1917, and on September 29,1925, the respondent mailed a deficiency notice to the petitioner with respect to the fiscal period ended June 30, 1920, showing in said deficiency notices the amounts here in controversy.
    In auditing the return of the petitioner for the fiscal year ended August 31, 1917, the respondent determined the income to be $23,-719.56 and the invested capital to be $123,600, the total tax liability to be $2,491.21, and the deficiency to be $2,440.83. In auditing the return of the petitioner for the fiscal period ended June 30, 1920, the respondent has determined the income to be $42,158.95, the invested capital to be $181,209.56, the total tax liability to be $9,520.16, and the deficiency to be $9,273.09.
    The respondent computed the deficiency in tax for the year 1917 as follows:
    Excess profits tax-$1,452.06
    Total net income_$23,719. 56
    Less: Profits tax_ 1, 452.06
    Amount taxable at 2%_ 22,267. 50 445.35
    Amount taxable at 4% (8/12 of year)_ 22, 267. 50 593.80
    Total tax assessable_ 2,491.21
    Original tax:
    Original return_$13. 89
    Amended return_ 36.49
    - 50.38
    Additional tax_ 2, 440. 83
   OPINION.

Momas:

The petitioner contends that the proposed assessments for the fiscal periods ended August 31, 1917, and June 30, 1920, are barred by the statute of limitations, there being no valid consents extending the period of time provided for in the statute.

The evidence shows that the petitioner filed its return for the fiscal year ended August 31,1917, with the collector of internal revenue on October 11, 1917, and that its return for the portion of the fiscal period ended June 30, 1920, during which it was operating, was filed on September 7, 1920; that in January, 1923, November, 1924, and January, 1925, three consents were filed with, and duly accepted by the respondent, with respect to the fiscal year ended August 31, 1917; that in August, 1925, an income and profits-tax consent with respect to the fiscal period ended June 30, 1920, was filed with and duly accepted by tlie respondent. All of these consents are set forth verbatim in the findings of fact herein. The evidence further discloses that deficiency letters were mailed to the petitioner for the fiscal years ended August 31, 1917, and June 30, 1920, on October 20, 1925, and September 29, 1925, respectively, setting forth the deficiencies herein contested.

The provisions of the Revenue Acts of 1921 and 1924 applicable to this issue are as follows:

Seo. 250. (d) The amount of income, excess-profits, or war-profits taxes due under any return made under this Act for the taxable year 1921 or succeeding taxable years shall be determined and assessed by the Commissioner within four years after the return was filed, and the amount of any such taxes due under any return made under this Act for prior taxable years or under prior income, excess-profits, or war-profits tax Acts, or under section 38 of the Act entitled “An Act to provide revenue, equalize duties, and encourage the industries of the United States, and for other purposes,” approved August 5, 1909, shall be determined and assessed within five years after the return was filed, unless both the Commissioner and the taxpayer consent in writing to a later determination, assessment, and collection of the tax; * * *
Sec. 277. (a) Except as provided in section 278 and in subdivision (b) of section 274 and in subdivision (b) of section 279—
* * * * # # *
(2) The amount of income, excess-profits, and war-profits taxes imposed by the Act entitled “An Act to provide revenue, equalize duties, and encourage the industries of the United States, and for other purposes,” approved August 5, 1909, the Act entitled “An Act to reduce tariff duties and to provide revenue for the Government, and for other purposes,” approved October 3, 1913, the Revenue Act of 1916, the Revenue Act of 1917, the Revenue Act of 1918, and by any such Act as amended, shall be assessed within five years after the return was filed, and no proceeding in court for the collection of such taxes shall be begun after the expiration of such period.
Sec. 278. (c) Where both the Commissioner and the taxpayer have consented in writing to the assessment of the tax after the time prescribed in section 277 for its assessment the tax may be assessed at any time prior to the expiration of the period agreed upon.
Sec. 277. (b) The period within which an assessment is required to be made by subdivision (a) of this section in respect of any deficiency shall be extended (1) by 60 days if a notice of such deficiency has been mailed to the taxpayer under subdivision (a) of section 274 and no appeal has been filed with the Board of Tax Appeals, or, (2) if an appeal has been filed, then by the number of days between the date of the mailing of such notice and the date of the final decision by the Board.

Obviously, if the consents herein were validly executed there can be no question but that under the provisions qf the statute herein-above recited, the respondent is authorized to make the assessments in question but it is equally as obvious if the consents were not validly executed, and therefore of no effect, the statute of limitations has long since expired and consequently no assessment can now be levied by the respondent.

The petitioner contends that under the laws of the State of South Carolina, upon the dissolution of a corporation, the trustees who are the directors of the dissolved corporation, and they only, have authority to bind the corporation, and, therefore, these consents signed by an officer of the Santee Mills, a separate and distinct corporation, and bearing the seal of that corporation, are invalid and of no effect.

Sections 4281, 4282, and 4283 of the Code of Laws of South Carolina provide:

4281. Art. 32. Continuance of Corporations for Closing Affairs After Expiration, Annulment, Etc., of Charter. — All corporations, whether they expire by their own limitation or be annulled by the Legislature, or otherwise dissolved, shall be continued bodies corporate for the purpose of prosecuting and defending suits by or against them and of enabling them to settle and close their affairs, to dispose of and convey their property and to divide their capital, but not for the purpose of continuing the business for which they were established.
4282. Art. 33. Powers of Directors after Dissolution of Corporation. — Upon the dissolution in any manner of any corporation, the directors shall be trustees thereof, with full power to settle the affairs, collect the outstanding debts, sell and convey the property and divide the moneys and other property among the stockholders after paying its debts, as far as such moneys and property shall enable them; they shall have power to meet and act under the by-laws of the corporation and under regulations to be made by a majority of said trustees, to prescribe the terms and conditions of the sale of such property, and may sell all or any part for cash, or partly on credit, or take mortgages and bonds for part of the purchase price for all or any part of said property.
4283. Art. 34. Power to Sue and Liability to Suit of Directors After Dissolution. — The Directors constituted trustees as aforesaid shall have authority to sue for and recover the aforesaid debts and property by the name of the corporation, and shall be suable by the same name or in their own names or individual capacities for the debts owing by such corporation, and shall be jointly and severally responsible for such debts to the amount of the moneys and property of the corporation which shall come to their hands or possession as such trustees.

The statute of limitations is generally regarded as a personal privilege and may be waived by defendant or asserted at its election. It has been held by some courts that where the defendant has parted with interest in property, the grantees, mortgagees, or other persons standing in his place are entitled to avail themselves of all the advantages of this plea. See Wood on Limitations, vol. 1, p. 142. The respondent not having taken issue on the subject of the Santee Mills filing the petition in this case and pleading the statute of limitations, apparently concedes that it has such an interest in the subject matter as would give it the right to avail itself of that plea.

It will be observed that the consents, except the one dated January, 1923, bore the following provision:

If this waiver is executed on bebalf of a corporation, it must be signed by sucb officer or officers of the corporation as are empowered under the laws of the State in which the corporation is located to sign for the corporation, in addition to which, the seal, if any, of the corporation must be affixed.

The consent of January, 1923, was signed “ Santee Mills (Successor to Bamberg Cotton Mills Co.) Taxpayer by Frank E. Whitman, Treasurer.” The consent of November 1924, was signed “Santee Mills, Taxpayer, by Frank E. Whitman, Treasurer.” The consent of January 1925, was signed “Bamberg Cotton Mill (Now Santee Mills) Taxpayer by Martin J. Keogh, Jr., Vice-President, J. E. Fullager, Secty.” The consent of August, 1925, was signed “ Santee Mills, Successors to Bamberg Cotton Mills Company, Taxpayer, Martin J. Keogh, Jr., Vice-President.” All of these consents bore the corporate seal of “ Santee Mills.”

The directors of the petitioner, as disclosed by the Certificate of Dissolution of Charter of May 14, 1920, were:

Wm. Elliot J. M. Albergotti
Jno. H. Cope R. J. Brown

It appears, therefore, that none of the men whose signatures appear in the consents filed with the respondent were directors or officers of the petitioner at the time of dissolution.

On what theory of law would the Board be justified in holding that a consent executed by an officer of a separate and distinct corporation from that of the petitioner constituted a consent executed by the petitioner itself and binding thereon? We can not say that the petitioner or the Santee Mills is estopped from denying the validity of these consents because they show clearly and unmistakably that they were executed by an officer of the Santee Mills, in his capacity as such, and that they bore the corporate seal of the Santee Mills. We have no reason to doubt the good faith of the officer executing them. The respondent was, or should have been, put on notice, and should have demanded that proper consents be filed, or the taxes should have been assessed in the event of refusal or failure to comply with his demands. The Board is powerless to apply the theory of equitable estoppel, for the reason that estoppels to be available on the trial must be affirmatively pleaded and proved. In re Stoddard Bros. Lumber Co., 169 Fed. 190. The respondent has nowhere in the record raised the question of estoppel either against the petitioner itself or the Santee Mills.

The respondent’s counsel apparently attaches some significance to the fact that the Santee Mills assumed all of the liabilities and obligations of the petitioner. The Santee Mills has not disputed the fact that it assumed the liabilities and obligations of the petitioner, but we are of the opinion that the fact that the Santee Mills was liable for the debts and obligations of the petitioner does not give it the right to execute consents without the express sanction of the state legislature in such cases, or some authorized delegation of power from the trustees in dissolution. The Santee Mills, even though it was the sole stockholder of the petitioner, has no more right to execute a consent for the petitioner than a stockholder has to bind a corporation by any other form of agreement or contract.

In the case Kemp v. United States, 12 Fed. (2d) 7, handed down by the Circuit Court of Appeals, Fifth Circuit, wherein the validity of certain consents signed by former officers of the dissolved corporation was under consideration, the court held that these consents, filed within the statutory period and executed by men who were officers and directors of the dissolved corporation, were valid. In that case, the court cited the provisions of the law of Texas, which are similar to section 4281 of the Civil Code of South Carolina, to the effect that the president and directors at the time of dissolution shall be trustees, etc. After considering the State law and finding that the men whose names appeared in the consents there under consideration had been officers and directors of the corporation, it found that they were valid. While the court does not so state, it appears clearly from the context that if the parties who signed them had not been the parties authorized by the State statute, they would have been held to be invalid.

The law of South Carolina, by which we are bound in this matter, places absolute control and power over the affairs of a corporation in dissolution in the directors of the corporation, who are made trustees by express statutory provision. Consequently, it is our opinion that they, and they only, could enter into agreements which would be binding on the corporation. These consents which do not bear the seal of the petitioner, which are not executed by an officer empowered under the laws of the State to act for the company have no binding effect upon the taxpayer. The statutes provide that the taxes in controversy shall be assessed within five years after the return was filed, unless the Commissioner and the “ taxpayer ” shall have consented in writing to an assessment after the time prescribed. The term “ taxpayer ” as used in the statute is clearly confined to the Bamberg Cotton Mills.

The deficiencies for the fiscal years ended August 31, 1917, and June 30, 1920, not having been assessed within five years after the filing of the return by the petitioner and no valid consent in writing-having been entered into between the respondent and the “taxpayer,” the assessment of the deficiencies for these years is barred by the statute of limitations. Having so held with respect to the first issue, it is obviously unnecessary for us to consider the two remaining allegations of error urged by the petitioner.

Reviewed by the Board.

Judgment will be entered for the petitioner.


author: Milliken:

text:
    James A. Wheatley, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 9665.
    Promulgated November 5, 1927.
    1. Where an American citizen residing in the Argentine Republic purchased a draft drawn in American dollars by the payment of pesos, and where under the terms of the purchase he was entitled to be reimbursed by the same number of pesos which he paid, and where the purchase was made in the hope that the rate of exchange would rise and gain result, but where the rate fell and the purchaser was compelled to pay a larger number of pesos, held, the purchaser of the draft suffered a deductible loss.
    2. The standard for measuring taxable income of an American citizen residing in the Argentine Republic is the American dollar, and where an American citizen acquires pesos which at the time of acquisition had a certain stable value measured in dollars, and where thereafter such value of pesos fell and the pesos so acquired were sold, there resulted a deductible loss.

      James G. Stewart, Esq., for the petitioner.

      GrawoiUe 8. Borden, Esq., for the respondent.
    This proceeding results from the determination by respondent of deficiencies in income tax for the years 1920 and 1921, in the respective amounts of $11,662.60 and $2,783.31. The deficiencies arise from the refusal of respondent to permit the petitioner to take the following deductions: (1) In the year 1920, petitioner ascertained a debt owing to him by Suchovolsky & Brother, to be worthless and charged the same off within the taxable year; (2) losses sustained during the years 1920 and 1921, resulting from the purchase and payments of drafts; (3) losses sustained in the year 1921, resulting from the sale of pesos; (4) losses sustained in the year 1921, from the sale of shares of stock of the Ault & Wiborg Co. It ha: been stipulated that petitioner incurred a deductible loss in the year 1920, with respect to item (1), in the amount of $4,943.70, and that he incurred a deductible loss in 1921 with respect to item (4) of $4,218.25.
    FINDINGS OF FACT.
    Petitioner is a citizen of the State of Ohio. From 1904 to 1920, he resided at Buenos Aires, Argentine Republic, and since the latter date, has resided at Cincinnati, Ohio. During the time petitioner resided at Buenos Aires, he was the general manager for the Argentine Republic of the Ault & Wiborg Co., of Cincinnati, Ohio. He received a small salary and shared in the profits made by the South American branch.

      In September, 1920, the Ault & Wiborg Go. drew three drafts for the total sum of $48,335.90 on their funds in Buenos Aires. The amount represented by the drafts was due them for merchandise shipped to Argentine and sold for them by petitioner'. Petitioner was directed by his employer to have all drafts paid promptly on their presentment, regardless of the rate of exchange prevailing on the day the same were presented for payment. The funds of Ault & Wiborg, on the date the drafts were received, were immediately charged with 130,177.36 paper pesos, the amount necessary to satisfy the drafts. When the drafts arrived in Buenos Aires, pesos had fallen in value as measured in American dollars. Petitioner, believing that the rate of exchange was too low and in hope it would soon become normal and believing he would make a profit by their' becoming so, on September 23, 1920, authorized the bank to pay the drafts and charge them to him. The drafts were so paid and charged to petitioner. He became, on that day, entitled to and did receive from the Ault & Wiborg funds, the sum of 130,177.36 paper pesos. The rate of exchange, instead of rising, continued to fall, and on November 23, 1920, petitioner paid the drafts with 145,007.70 paper pesos. The difference between the number of pesos which would have paid the draft on September 23, 1920, and the number which was paid on November 23, 1920, when expressed in American money, was $4,943.46.
    In September, 1921, the Ault & Wiborg Co. drew three drafts totaling $71,348.14 on their funds in Buenos Aires. For-the reasons given above, petitioner authorized the bank to pay the drafts and charge them to him. The drafts were so paid and charged to petitioner. He subsequently executed a note to the bank for the amount of the three drafts. On December 16,1921, he paid the note in paper pesos. The number of paper pesos paid was 216,476.74. The number of paper pesos which would have paid the drafts when petitioner accepted payment, was' 188,910.41. The difference between these amounts as expressed in American money, was $9,085.53.
    Petitioner, during his stay in Buenos Aires, accumulated more than half a million paper pesos, which were accumulated at the normal rate of exchange of 1.05. In March, 1921, an installment payment of $4,000 became due to the collector of internal revenue, in payment of Federal income tax, and he went to his bank in Buenos Aires and bought a draft for $4,000, sending the same to Cincinnati in payment of his tax. He bought the draft for $4,000 with the paper pesos which he had accumulated, at the normal rate of exchange of 1.05. The draft for $4,000 cost him 11,554.55 paper pesos. At the normal rate of exchange of 1.05, it would have cost him 9,545.45 paper pesos to have bought the draft. Petitioner paid 2,009.10 more paper pesos for the draft than it would have cost him at the rate of exchange at which he had acquired his South American capital. The 2,009.10 paper pesos was the equivalent of $695.51 United States money.
    On July 1, 1921, petitioner was in Cincinnati, and, by cable, drew on his funds in Buenos Aires, for $5,000, to pay an installment on his income tax. This sum cost him 16,727.27 paper pesos. At the normal rate of exchange at which he had accumulated his South American capital, the $5,000 which he purchased would have cost him 11,931.82 pesos. The difference of 4,795.45 paper pesos was the equivalent of $1,433.42 United States money.
    On December 9, 1921, petitioner was in Cincinnati, and, by cable, drew on his funds in Buenos Aires for $5,000 to pay an installment on his income tax. This sum cost him 15,306.82 paper pesos. At the normal rate of exchange at which he had acquired his South American capital, the $5,000 which he purchased, would have cost him 11,921.81 pesos — the difference of 3,375.01 paper pesos amounted to $1,102.50 United States money.
    During the years involved, the relative value of gold and paper pesos remained stable but there were violent fluctuations in exchange with the United States.
    For many years prior to 1920, the rate of exchange was practically normal at all times, but in that year the value of pesos, as measured in dollars, began to fall.
   OPINION.

Milliken:

Petitioner was instructed by his employers, Ault & Wiborg Co., to promptly pay all drafts upon presentment. Under this direction the funds of the latter became immediately available and were applied to the extent necessary to pay the drafts at the time presented for payment. Petitioner had lived in South America for years, and had never experienced so violent a fluctuation in the rate of exchange, and believing that the same would soon be normal, assumed the payment of the drafts to the bank. The funds of Ault & Wiborg Co. were passed to him, corresponding to the then prevailing rate of exchange. He believed he would be required eventually to pay to the bank fewer pesos than was necessary to then pay the drafts and he believed he stood to make a gain represented by the difference between the funds of Ault & Wiborg passed to him and the sum he would be required to pay when the rate of exchange became normal. When he undertook to and did assume payments of the drafts, he entered into a transaction for profit. His expectations were not realized and instead of making a profit, he sustained a loss. This loss is deductible under section 214(a) (4) of the Revenue Acts of 1918 and 1921.

Petitioner is an American citizen and as such must pay an income tax on his earnings, regardless of the place of his residence or the fact that his entire income was earned in Buenos Aires. His standard for measuring the amount of his annual income was the American dollar. Paper pesos were nothing more than a commodity, which, for tax purposes, must be translated into American dollars. ' During his stay in Buenos Aires, he had accumulated 500,000 paper pesos which when earned bore the normal rate of exchange. It was in effect the same as if he had lived in Cincinnati during the entire time of his residence in Buenos Aires, and had purchased, with his capital, paper pesos at the normal rate of exchange, and in the year 1921, he sold the paper pesos, converting the same into his standard, i. e., American dollars. Petitioner, in effect, did this when he converted sufficient paper pesos to buy a draft for $5,000 and the difference between the rate at which he secured the paper pesos and the rate at which he disposed of the paper pesos constitutes a deductible loss sustained in the year 1921.

Reviewed by the Board.

Judgment will he entered on 15 days' notice, v/nder Rule 50.


author: Steenhagen:

text:
    Ohio Clover Leaf Dairy Co., Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket Nos. 6778, 13029.
    Promulgated November 5, 1927.
    1. A stipulation by counsel that an item “ is an allowable loss for tax purposes in the event the Board decides ” a general question, must be disregarded as of no effect because it stipulates a conclusion of law and thus attempts to limit the function of the Board and because it is conditioned upon the decision by the Board ' of an abstract question not within the issues.
    2. Petitioner was in contractual possession of certain deprecia-ble assets and claimed the right to deduct depreciation and losses in respect thereof, setting forth the terms of its contract, held upon the evidence that such depreciation and losses have not been established.

      Thomas O. Marlar, Esq., Hamj J. Gerrity, Esq., and L. T. Kono-pah, G. P. A., for the petitioner.

      M. E. MoDowell, Esq., for the respondent.
    These proceedings involve deficiencies in income tax of $10,040.82, $34,519.14, and $12,906.10 for 1919,1920, and 1921, respectively. The controversy arises from the respondent’s action in disallowing depreciation on and loss on the sale of property leased under the circumstances hereinafter set forth, and in disallowing depreciation on and loss on the sale of certain other property not under lease.
    The parties have stipulated all the facts.
    FINDINGS OF FACT.
    The petitioner is an Ohio corporation, with its principal place of business in Toledo, engaged in and operating a dairy business. It was incorporated February 14, 1919, with an authorized capital stock of $10,000. The entire issue of stock was subscribed for by the Ohio Dairy Co. and the Clover Leaf Dairy Co., and cash was paid therefor by them in the amounts of $6,500 and $3,500, respectively. The books of the petitioner are and have been during all the times here in question kept upon an accrual basis, and its return of income and profits tax liability for the taxable period ended December 31, 1919, was made upon such basis.
    On or about February 15, 1919, the petitioner became the lessee for a period of 20 years of the plant and equipment of both the Ohio Dairy Co. and the Clover Leaf Dairy Co., both corporations located in the city of Toledo, Ohio, and engaged in the business of collection, pasteurization and distribution of milk and dairy products.
    The provisions of the lease pertinent to this inquiry are as follows:
    This Indenture made and entered into this 15th day of February, 1919, by and between The Ohio Dairy Company, hereinafter called “ Ohio Company,” The Clover Leaf Dairy Company, hereinafter called “ Clover Leaf Company,” (said companies hereinafter called collectively “Old Companies”) and The Ohio-Clover Leaf Dairy Company, hereinafter called “ Operating Company ”; Witnesses :
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    1. The Ohio Company and The Clover Leaf Company respectively lease to the Operating Company the property, routes, business, good will and facilities described in the annexed schedule from the 15th day of February, 1919, to the 15th day of February, 1939, upon the rentals, considerations, terms, covenants, options, provisions and conditions herein set forth.
    Each of the Old Companies for itself agrees that it will not engage in the business of buying, selling or delivering milk in the City of Toledo, Lucas County, Ohio, during such period of time as this agreement is in full force and effect, or during such period of time as the Operating Company, its successors or assigns, are engaged in the business of buying, selling or delivering milk in the City of Toledo, Ohio, if the Operating Company shall acquire title to the properties hereby leased in accordance with the terms of Paragraph Sixteen (16) herein.
    The Operating Company shall not have the right to use the trade name “ Daisy Brand ” or the name “ The Ohio Dairy Company ” in the manufacture, sale or delivery of ice cream.
    2. The Operating Company shall take over said leased property and continue the business of supplying milk and milk products in and about the City of Toledo, and supply all customers of the Old Companies and others, using for that purpose such of the employees of the Old Companies as are best fitted for the work, and making suck changes in routes and other operating methods as may be best calculated to effect the economies desired.
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    4. The Operating Company shall use every effort to maintain the property and business turned over and leased to it hereunder so that on the termination of this agreement the business and property of the Old Companies, or its fair equivalent, can be returned to said Old Companies in good operating condition, but on the termination of this agreement the Operating Company shall be under no obligation to return to either of the Old Companies the identical customers, sources of supplies, business'or property received from such company, but it shall be at liberty to return the full equivalent of such property, customers, sources of supply and business observing in the division of the property and business upon the termination of this agreement the percentages herein used for the payment of rentals to the Old Companies, and having due regard to future operations and giving such company sufficient property and equipment to carry on its business.

      5. All horses, wagons, cans, bottles and other equipment turned over to the Operating Company shall be kept in first class order and condition at all times, and the Operating Company shall at all times have on hand at least as much physical property as was turned over to it, and at least as many customers and routes as were turned over to it, and the Operating Company shall make all repairs and renewals necessary to maintain said property in said condition.
    6. The Operating Company shall keep and maintain a depreciation fund sufficient in amount to keep all said property in the state, quantity and condition aforesaid, and to replace the same when worn out or obsolete, and it shall also keep and maintain at all times a contingent fund out of which bad debts, damage claims or other losses can be paid or off-set.
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    8. The Operating Company shall insure all property usually insured by Dairy < Companies against loss or damage by fire or other casualty, free of expense to either of the Old Companies, and in the event of loss or damage the insurance money collected shall be used to repair or replace the property damaged or destroyed.
    No damage to or destruction of the property herein described shall operate to terminate this agreement or abate the rentals hereunder or any part thereof.
    9. The Operating Company may at any time during the term of this indenture sell, lease, exchange or dispose of any items or part of the property or business hereinafter described no longer used or useful in the conduct of the business. Any such lease of real estate, buildings or equipment shall be subject to termination on reasonable notice so that the Operating Company can restore such property to the owner in ease of the termination of this agreement. It shall keep a strict account of the property thus disposed of and of the proceeds or property received in payment or exchange therefor, so that at the end of the term of this indenture the property acquired from each of the Old Companies, or its full equivalent, shall be returned. The entire property or business shall not be sold, exchange [sic] or disposed of, but shall be kept intact as a going concern.
    10. The Old Companies and each of them shall on request execute, acknowledge and deliver such instruments or papers as may be required by the Operating Company to completely carry out and perform the terms of this indenture, or to complete any sale, lease, exchange or other disposition of the property made by the Operating Company.

      11. The Operating Company shall observe and comply with all the laws and ordinances applicable to the business so that the value of said business shall not be impaired.
    12. The business of the Operating Company shall be conducted under a system of accounting- to be approved by the Presidents of the Old Companies, so that proper records of the properties and operations shall be kept, and so that there can be a correct ascertainment of the profits or losses.
    If during the term of this indenture a controversy shall arise between any of the parties as to any matters of accounting or any entries made or proposed to be made on the books of the Operating Company, and the parties shall be unable to agree, the matter in controversy shall be referred to Robert McIntosh & Company, Ernst & Ernst, or Price, Waterhouse & Company, whichever the President of the Operating Company may select, and the decision of the firm of accountants thus selected shall be final and binding upon all parties.
    As rental for the use of the leased property, the Operating Company shall pay to the Ohio Company an amount equal to 55.25% of its net earnings, but in any event not less than $650.00 per month, and it shall pay to the Clover Leaf Company an amount equal to 29.75% of its earnings, but in any event not less than $350.00 per month.
    Said rentals in excess of the stipulated monthly rentals shall be paid annually on the 15th day of the second month following the close of the year, except as hereinafter provided.
    Said rental shall be treated on the books of the Operating Company as an expense of operation and as if a fixed amount of money had been stipulated as rent. Each month the Operating Company shall set up on its books in a rental account an amount equal to 85% of its net profits for the month, and said amount shall be credited to the Old Companies and the stipulated minimum rental shall be paid monthly subject however, to the proper and necessary ad- > justment to be made at the end of the year when exact net profits are to be ascertained.
    The Operating Company may on request advance to either of the Old Companies an amount not in excess of 50% of the estimated rental accrued in favor of such Old Companies at any time, and such advances shall be charged against such Old Company and shall be deducted at the time of the annual settlement from the rentals payable to it, and if at the end of the year such advances are not repaid out of the rentals, the Old Company receiving such advances, shall reimburse the Operating Company, and the Operating Company shall have a lien upon all the leased property of said Old Company to secure a repayment of such advances, in excess of the stipulated monthly minimum. If any such advances are made both companies shall have the right to demand and receive advances.
    The Old. Companies shall be under no obligation to refund any part of the fixed monthly rental of $650.00 to the Ohio Company or $350.00 to the Clover Leaf Company, and shall only be obligated to refund advances in excess of such fixed monthly rentals.
    13. * * * Each of the Old Companies shall immediately execute, acknowledge and deliver to the Operating Company separate recordable leases of real estate and machinery, providing for the payment of nominal rentals to the Ohio Company and to the Clover Leaf Company and containing terms, provisions and conditions conforming to those herein set forth. This Indenture in any case shall be taken and held to be a part of such leases.
    14. Each of the Old Companies shall pay .all taxes and assessments charged against it or its property payable on December 20, 1918, and June 20, 1919, and the Operating Company shall pay all taxes and assessments payable after June 20, 1919, on the leased property.
    15. The Old Companies and each of them covenant and agree that they will pay all outstanding obligations, indebtedness or liabilities, which may in any way be or become a charge upon the property described in the annexed schedules, so that the Operating Company shall take said property free of all indebtedness and claims whatsoever excepting the Clover Leaf Company bonds and the Old Companies each for themselves and not for the other warrant the title of the property in the annexed schedules, to be clear and unincumbered, except by taxes and the Clover Leaf Company bonds; that they have good right and title to enter into this Indenture, and that upon the performance of the terms, covenants and conditions, hereof, and the payment of the rentals herein reserved, the Operating Company shall quietly use and enjoy such property during the term of this Indenture.
    16. The Operating Company shall have the exclusive option during the term of this Indenture to acquire all of the property, routes, business, good will and facilities, hereby leased, but not any part thereof, for the considerations hereinafter mentioned, by giving to each of the old companies notice thereof by Registered Mail. Payment for said properties, aforesaid, shall be made by delivering to the Old Companies increased capital stock of the Operating Company, to be fully paid up and non-assessable, in such amounts as may be agreed upon by the parties and, should they be unable to agree then the amount of stock to be issued shall be determined by a board of three arbitrators consisting of the persons who shall then be the president of the Ohio Company and the Clover Leaf Company and the president or vice president of a bank or trust company in Toledo to be selected by the president of the Operating Company. The decision of a majority of such arbitrators shall be final and binding. When the amount of stock so determined has been provided by an appropriate increase of the stock of the Operating Company said amount of stock shall be issued and divided by delivering sixty five per cent. (65%) thereof to the Ohio Company and thirty five per cent. (85%) thereof to the Clover Leaf Company or their respective nominees.
    Upon the exercise by the Operating Company of the option to purchase the properties, aforesaid, the Operating Company shall be relieved of any further payment of rentals and the Old Companies shall concurrently, upon delivery of such of the capital stock as above provided for, deliver to the Operating Company pursuant to the foregoing provisions good and sufficient conveyances with usual covenants of warranty as to title, the same to be free and clear from all incumbrances [with certain exceptions not material here].
    17. In case the Operating Company shall not exercise its option to purchase on or before February 1, 1928, it shall immediately prepare for the return of the property at the end of the term of this Indenture by dividing the property, routes, business, supplies, customers and facilities in its hands in such manner and in such proportion as to enable it to return to each of the Old Companies the property delivered by it to the Operating Company, or the fair equivalent of such property in value and operating utility so that at the end of the term of this Indenture each of the Old Companies cari take their property or its equivalent and proceed with its business without undue delay or expense.
    On the termination of this Indenture the Operating Company shall restore or put the plants of the Old Companies so that each will be in at least as good condition as it is now in and so that each will be equipped to handle and care for the owners percentage of the business at and after the time of termination.

      18. If the Operating Company shall fail to pay the rentals herein stipulated, or to perform the terms, covenants and provisions of this Indenture for a continuous period of three (8) months then either Old Company may give notice of such default to both the Operating Company and the other Old Company, ■which notice shall specify in detail the default complained of, and if said default specified in said notice shall continue for a period of three (8) months after the date of service of said notice then and in such case said Old Company, giving notice, may at the end of said second period of three (3) months declare this Indenture terminated, and thereupon the properties of each of the Old Companies shall be returned as is provided for in case of a failure to exercise the option to purchase the property, in detail set forth in paragraph 17 hereof. Said notices aforesaid shall be in writing and shall be addressed to the respective parties at Toledo, Ohio, and shall be mailed to the respective parties by United States Registered Mail.
    The property and assets covered by the lease of February 15, 1919, were valued and agreed upon by the lessor corporations and the petitioner as lessee for the purpose of ascertaining the rental to be paid under said lease and the interest of the respective lessors and the amount representing such values was set up on the books of the petitioner as follows:
    Land-$10,100.00
    Buildings_ 29,376.30
    Plant equipment_ 120, 665.97
    Horses_ 17,375.00
    Wagons_ 21,870.00
    Auto truck_ 2,000.00
    Stable supplies-568.90
    Containers_ 12, 753. 00
    Ice cream cans-1,463. 50
    Bottles_ 4,187.50
    Receiving stations_ 20, 550.14
    Office furniture and fixtures. 2,058.25
    242, 858. 56
    In returning its income for the taxable period ended December 31, 1919, the petitioner deducted from gross income, the deduction having been allowed by the Commissioner, the sum of $33,160.80 for repairs.
    In returning its income for the taxable period ended December 81, 1919, the petitioner deducted from gross income the sum of $26,-449.99, claimed as depreciation sustained on the property and assets covered by the lease agreement referred to in the foregoing paragraph and credited said amount on its books to a reserve for depreciation. Thereafter, on July Y, 1925, the Commissioner of Internal Revenue mailed the petitioner a deficiency letter in which he disallowed said deduction from income and found a deficiency in tax of $10,042.82.

      In returning its net income for the taxable period ended December 31, 1920, the petitioner deducted from gross income the sum of $26,675.04, as depreciation sustained on the property and assets covered by the lease agreement dated February 15, 1919, and credited said amount on its books to a reserve for depreciation. Likewise, in its return for the taxable period ended December 31, 1921, petitioner deducted from gross income the sum of $10,283.67, as depreciation sustained on the property and assets covered by the lease agreement dated February 15, 1919, and credited said amount on its books to a reserve for depreciation. Thereafter, on February 5, 1926, the Commissioner of Internal Revenue mailed the petitioner a deficiency letter in which he disallowed said deductions from income on account of depreciation sustained on said property and assets.
    During 1920 the petitioner scrapped, abandoned, and sold, pursuant to paragraph 9 of the lease agreement dated February 15, 1919, certain of the leased assets having a depreciated cost or value of $125,058.79, and received therefor a total consideration of $74,762.67. ' Likewise, during the year 1921 a loss was sustained in the amount of $3,699.61 on account of the death and/or sale of horses leased.
    In 1920 petitioner sustained a loss of $1,925.09 on the sale of property owned by it, not covered by the lease agreement. In 1921 property owned by petitioner, not covered by the lease agreement, sustained depreciation in the amount of $17,526.
   OPINION.

Steenhagen:

The foregoing facts were embodied in a written stipulation upon which the case was submitted. From these facts the petitioner argues that as a matter of law it is entitled to deductions for the exhaustion, wear and tear of the leased property, and deductions for certain losses in connection therewith.

The issue of depreciation is so inadequately covered by the facts that we can not reach the question of law. It appears only that the petitioner, acting under article 6 of the contract, set up on its accounts certain amounts as depreciation; and that it deducted these amounts bn its returns. The Commissioner disallowed the deductions without saying why, and the petitioner instituted this proceeding.

Assuming without deciding that petitioner is entitled to any deduction for depreciation, such deduction is not proved in fact by a stipulation that an amount was set aside on the books and deducted; for whether this is correct is the very matter in issue. None of the factors for a determination of a reasonable allowance, if any, has been alleged, stipulated or proved, and hence the petitioner must fail. The respondent is sustained.

The petitioner claims deductions for losses by reason of the death of horses and the disposition of property possession of which was acquired under the contract. It is attempted to be stipulated that this is “an allowable loss for tax purposes in the event the Board decides that petitioner is entitled to deduction for loss with respect to the sale of the assets covered by the lease agreement of February 15, 1910.” That portion of the agreement between counsel which we have quoted must be disregarded as of no effect for two reasons. In the first place, insofar as it attempts to stipulate that an item is deductible under the statute as a loss, it is a conclusion of law. As such it is either an agreement which entirely removes the question from the proceeding, or else it is an attempt to limit the function of the Board to decide the issue of liability. In either aspect it is ineffective. In the second place, it is conditioned upon the decision by the Board of an abstract-question which is not within the issues, i. e., whether the petitioner is entitled as a general proposition to deductions for such loss as may occur on the sale of any of the leased assets.

But insofar as the stipulation agrees upon facts it has been embodied in the findings, and we examine these to consider whether they prove that petitioner has sustained losses deductible under the statute.

The disposition in 1920 for $74,762.67 of the leased assets listed at $125,058.79 may or may not involve a loss to petitioner. At the beginning of the year it had, not the ownership but the possession of the property. This property represented no investment to it, but only a contract obligation to keep and restore a like quantity. Non constat, it could have replaced the property for the $74,762.67 and thus been no worse off either in 1920 or at any time thereafter. Similarly as to the alleged loss “ likewise sustained ” on the death or sale of horses in 1921. If the market price of horses went down it might have made replacements for $3,699.61 less than depreciated cost of the owner. Until petitioner spent money out of its own pocket its capital was not affected.

The respondent is sustained in his disallowance of the alleged depreciation and losses on leased property because of insufficient evidence. The stipulation that losses and depreciation were sustained on property not covered by the lease makes it unnecessary to consider those items.

Reviewed by the Board.

Judgment will be entered on 15 days' notice, wider Bule 50,