Interurban Constr. Co. v. Commissioner

INTERURBAN CONSTRUCTION CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Interurban Constr. Co. v. Commissioner

Docket No. 7028.

United States Board of Tax Appeals

5 B.T.A. 1292; 1927 BTA LEXIS 3633;

January 31, 1927, Promulgated

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In the taxable year the petitioner was the owner of certain stock of its subsidiary which had cost $21,929.40 and was sold to its stockholders and the stockholders of the subsidiary (affiliation continuing) for $60,000. The Commissioner computed a profit on the transaction. Held, that the sale did not give rise to a taxable gain.

Claude Collard, Esq., for the petitioner.

W. Frank Gibbs, Esq., for the respondent.

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LITTLETON

The Commissioner determined a deficiency for the year 1920 of $26,899.81 upon the basis of a consolidated return of the petitioner with the Oklahoma Union Railway Co. and the Sapulpa Electric Interurban Construction Co. The petitioner claims that the determination of a profit upon the sale by it of the stock of its subsidiary, the Oklahoma Union Railway Co., was erroneous.

FINDINGS OF FACT.

Petitioner is an Oklahoma corporation with principal office at Tulsa. Throughout the taxable year it was affiliated with the Oklahoma Union Railway Co. and the Sapulpa Electric Interurban Construction Co. At the beginning of the taxable year 1920 petitioner was the owner of 3,500 shares of the capital stock of the Oklahoma Union Railway Co. During the year 1920 petitioner sold 1,200 shares of the stock of the Oklahoma Union Railway Co., which it owned, to certain individuals who were stockholders of the petitioner and the Oklahoma Union Railway Co. for $60,000. The cost of these 1,200 shares to the petitioner was $21,929.40.

The Commissioner computed the profit on the sale to be the difference between $60,000 and $21,929.40. The stock of the Oklahoma Union Railway Co. was acquired by petitioner in 1917.

OPINION.

LITTLETON: The issue involved in this proceeding is the same as the issue decided by the Board in the , upon authority of the decision of the Board in the . Upon the authority of the decisions in those cases, it is held that petitioner derived no taxable gain from the sale of stock of the Oklahoma Union Railway Co. in 1920, and the Commissioner's determination of a deficiency, in so far as it resulted from the inclusion of a profit upon this transaction, was erroneous.

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