Davis Yarn Co. v. Commissioner

OBINION.

Van Fossan :

The question in this case is the amount of the excess-profits credit to which the petitioner, a corporation organized March 1, 1921, and filing a return covering its operations to and including December 31, 1921, is entitled under section 312 of the 1921 Act. This section provides:

*301That the excess-profits credit shall consist of a specific exemption of $3,000 plus an amount equal to 8 per centum of the invested capital for the taxable year.

The questions arising in the instant proceeding are substantially the same as those involved in the Louis Hymel Planting & Manufacturing Co., 5 B. T. A. 910. That case arose under the Revenue Act of 1918, but we find no material difference in the pertinent sections of Acts involved in the two proceedings. In that case, the question of what is a return for a fractional part of a year and what is a return for a year was discussed at length and decided in accordance with principles laid down in the case of Bankers’ Trust Co. v. Bowers, 295 Fed. 89. The Board has further had occasion in other instances wherein similar questions were involved, to apply the principles laid down in the Bankers’’ Trust Co. case; Carroll Chain Co., 1 B. T. A. 38; Lynch Construction Co., 3 B. T. A. 313. See also Arthur Walker & Co., 4 B. T. A. 151, and Durabilt Steel Locker Co., 5 B. T. A. 239.

Following the reasoning used in the above cited cases, we are of the opinion that the petitioner’s return in which was included the income for the period from March 1, 1921, the date of organization to December 31, 1921, was not a return for a “ fractional part of a year ” but was a return for a full taxable year of 12 months and that it is entitled to the full specific exemption of $3,000.

The remaining question is the proper basis to be applied in arriving at the invested capital for computing the additional deduction of 8 per cent allowed as an excess-profits credit under section 312. On this point also the decision is governed by the principles announced by the Board in Louis Hymel Planting & Manufacturing Co., supra.

Judgment will be entered on 15 days’ notice, under Rule 50.

Considered by MaRquette, Milliken, and Phillips.