Purity Oats Co. v. Commissioner

APPEAL OF PURITY OATS CO. AND PURITY OATS CO. OF DAVENPORT.

Purity Oats Co. v. Commissioner

Docket Nos. 4364, 4365.

United States Board of Tax Appeals 4 B.T.A. 585 ; 1926 BTA LEXIS 2249 ; July 30, 1926 , Decided *2249 Taxpayers were corporations organized and doing business in the State of Iowa during the year 1918 and until July 1, 1919, when their assets were sold and they subsequently dissolved during the year 1919. They sustained net losses in 1919. Held, that the net losses for so much of the year 1919 as expired prior to the dissolution were allowable as deductions from net income for 1918.

Eliot C. Lovett, Esq., and Dwight P. Green, Esq., for the petitioners.

P. S. Crewe, Esq., for the Commissioner.

LITTLETON *585 Before JAMES, 1 SMITH, LITTLETON, and TRUSSELL.

These are appeals from determinations of deficiencies in income and profits taxes for the year 1918 in amounts which had theretofore been assessed but not paid and which are not disclosed by this record.

FINDINGS OF FACT.

The Purity Oats Co., during the taxable year, was an Iowa corporation with its principal office at Keokuk, and the Purity Oats Co. of Davenport was also an Iowa corporation with its principal office at Devenport. On July 1, 1919, the American Hominy Co., a New Jersey corporation, purchased *2250 all the assets of the said corporations, subject to their liabilities.

The American Hominy Co. was adjudged a bankrupt by the United States District Court for the Northern District of Illinois, Eastern Division, on January 4, 1924, and the Chicago Title & Trust Co. was appointed trustee in bankruptcy for the American Hominy Co. and ever since has acted and now is acting as such trustee.

On July 1, 1919, said Purity Oats Co. and said Purity Oats Co. of Davenport, respectively, transferred all their assets to the American Hominy Co. and themselves legally dissolved prior to December 31, 1919.

For the period from January 1, 1919, to June 30, 1919, said Purity Oats Co. sustained a net loss of $29,629.79, and said Purity Oats Co. of Davenport sustained a net loss of $96,114.52.

OPINION.

LITTLETON: The taxpayers claim to be entitled to the deduction of the net losses as above set forth. The Commissioner denied the claim *586 upon the ground that the taxpayers were not in existence for the full year 1919.

The situation presented by these appeals is comparable with that in the *2251 . The only difference between the two cases consists of the fact that these taxpayers had an entire year 1918 and a fractional year 1919, whereas, in the Patapsco case, both years were fractional. We are of the opinion that the decision of the question involved in these appeals is governed by the rule of the Patapsco case, and that these taxpayers are entitled to deduct the net losses sustained in the year 1919 from the net income for the year 1918.

Judgment for the petitioners. Order of redetermination will be entered on 15 days' notice, under Rule 50.

Footnotes

1. This decision was prepared during Mr. James' term of office. ↩