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F.H. Peavey Co. v. United States

Court of Claims
Jan 18, 1932
55 F.2d 516 (Fed. Cir. 1932)

Summary

In F.H. Peavey & Co. v. United States, 55 F.2d 516 (Ct. Cl. 1932), it was held under section 238(e) of the Revenue Act of 1921 (which is in all material respects the same as section 131(f) of the Internal Revenue Code of 1939) that for the purpose of foreign tax credit, the dividend should be considered as having been paid out of the accumulated earnings and profits as of the beginning of the year in which it was paid absent any showing of the amount of the accumulated earnings and profits at the date the distribution was made.

Summary of this case from Steel Improvement & Forge Co. v. Comm'r of Internal Revenue

Opinion

No. J-19.

January 18, 1932.

Suit by the F.H. Peavey Company against the United States.

Judgment in favor of the defendant.

The plaintiff, a Minnesota corporation, brings this suit to recover the sum of $29,112.87, with interest thereon, an alleged overpayment of its income taxes for the calendar year 1922.

The Commissioner of Internal Revenue allowed the plaintiff a credit against its 1922 taxes of $10,317.41 for income taxes paid to a foreign country, under the provisions of section 238(e) of the Revenue Act of 1921 ( 42 Stat. 258). The plaintiff alleges it was entitled to a credit of $39,430.28, and seeks in this suit to recover the difference between the amount of credit allowed and the amount claimed.

The case having been heard by the Court of Claims, the court, upon the report of a commissioner and the evidence, makes the following special findings of fact:

1. The plaintiff is now and at all of the times hereinafter mentioned was a corporation duly created, organized, and existing under and by virtue of the laws of the state of Minnesota, having its place of business in the city of Minneapolis, state of Minnesota, and presents its petition and claim in its own right as such corporation, and against the United States.

2. The plaintiff was engaged in the taxable year 1922 in the grain business.

3. On March 13, 1923, the plaintiff filed its tentative tax return for the calendar year 1922. On July 13, 1923, the plaintiff filed its final consolidated tax return for the year 1922, which return showed a tax liability of the plaintiff and its affiliated companies to be the sum of $120,676.06 for the said year. The consolidated return filed by the plaintiff on July 13, 1923, disclosed a consolidated net income of $1,305,362.05, the net income of each company as follows:

F.H. Peavey Co. .................... $ 479,911.48 Peavey Duluth Terminal Co. ........... 310,685.24 Monarch Elevator Co. ................. 250,266.93 The Peavey Co. ....................... 37,740.51 Globe Elevator Co. ................... 226,757.89 _____________ $1,305,362.05

The tax at 12½ per cent. on above consolidated net income of $1,305,362.05 was $163,170.26, less credit of $42,494.20 on account of income tax paid to the Canadian government by the Canadian corporations named in finding 7 hereof, leaving a net tax due on original consolidated return of $120,676.06. The tax which was assessed on the original consolidated return was $120,676.06, all of which was assessed against and paid by F.H. Peavey Company.

4. A revenue agent made an examination of the 1922 return and as a result the net income of the Globe Elevator Company was eliminated from the consolidated return, resulting in an overassessment of $28,344.74, which was approved by the Commissioner of Internal Revenue, this amount of $28,344.74 being refunded, leaving a net amount paid of $92,331.32 for 1922. The overassessment of $28,344.74 was arrived at by the agent as follows:

F.H. Peavey Company Year 1922

Consolidated Net Income as Determined by Revenue Agent

F.H. Peavey Company .......................... $ 479,911.48 Peavey Duluth Terminal Co. ..................... 310,685.24 Monarch Elevator Co. ........................... 250,266.93 The Peavey Co. ................................. 37,740.51 _____________ Consolidated net income for income-tax purposes ...................................... $1,078,604.16

Computation of Tax

Net income taxable year ........................ $1,078,604.16 _____________ Income tax at 12½% ............................. $ 134,825.52 Less credit for income and profits tax paid by subsidiary corporations to Canada ..... 42,494.20 _____________ Tax due ........................................ $ 92,331.32 Tax previously assessed ........................ 120,676.06 _____________ Overassessment ................................. $ 28,344.74

5. For the calendar year 1922 at the time of filing its completed consolidated return on July 13, 1923, as shown in finding 3 above, it filed as part of said consolidated return Form 1118, "Claim for credit on corporation income-tax return for taxes paid or accrued to a foreign country or a possession of the United States," and credit in the amount of $42,494.20 which was claimed thereon was allowed on account of income tax paid by subsidiary corporations to Canada.

6. The plaintiff, under date of March 14, 1927, made and filed a claim for refund, to which was attached and made a part thereof a letter of September 28, 1926, addressed to the Commissioner of Internal Revenue by the plaintiff and an amended Form 1118, "Claim for credit on corporation income-tax return for taxes paid or accrued to a foreign country or a possession of the United States," with the collector of internal revenue, St. Paul, Minn., in the amount of $29,112.87, claiming as a credit for income taxes paid by subsidiary corporations to Canada an amount of $71,607.07, instead of $42,494.20, originally claimed and allowed. In its claim for refund hereinbefore referred to, the plaintiff asserts that its application should be allowed for the following reasons: "This is to cover additional amount claimed as credit for foreign taxes (Canadian income tax) paid by Canadian subsidiary corporations on undivided profits from which dividends were received by F.H. Peavey Company during the calendar year 1922. This increase in credit is the result of the consolidation of the accounts of the British America Elevator Co. and the Port Arthur Elevator Company for the purpose of arriving at credit as shown by amended Form 1118 hereto attached."

7. The credit of $42,494.20, allowed as shown above, is figured as follows:

National Elevator Company, Ltd. .......... $ 7,344.83 Northern Elevator Company, Ltd. .......... 118.05 Grand Trunk Pacific Elevator Co., Ltd. ... 24,713.91 British America Elevator Co., Ltd. ....... 10,317.41 ============== Total ................................. $371,875.00

8. During the year 1922 the plaintiff received cash dividends from the British America Elevator Company, Ltd., as follows:

June 15, 1922 ........................... $159,375.00 September 18, 1922 ...................... 212,500.00 ___________ Total ................................ $371,875.00 ___________ Converted to American exchange at rate of 0.99535 ............................. $370,148.44

On its original consolidated return for the calendar year 1922 the plaintiff computed credit for income taxes paid to Canada by the British America Elevator Company, Ltd., on the undivided profits from which it paid said dividends to plaintiff as follows:

Undivided profits of British America Elevator Company, Ltd.:

Fiscal year July 16, 1920, to July 15, 1921 $ 673,844.42 Fiscal year July 16, 1921, to June 30, 1922 608,147.67 _____________ Total .................................. $1,281,992.09 =============== Converted to American exchange at rate of 0.99535 ............................... $1,276,030.82

Income taxes paid to Canada by British America Elevator Co., Limited:

Fiscal year July 16, 1920, to July 15, 1921 ... $14,676.80 Fiscal year July 16, 1921, to June 30, 1922 ... 21,054.84 ============= Total ...................................... $35,733.64 Converted to American exchange at rate of 0.99535 ...................................... $35,567.47

Income tax paid to Canada by the British America Elevator Company, Ltd., on undivided profits from which dividends were paid plaintiff in year 1922:

370,148.44 ------------ × $35,567.47, or .................... $10,317.41 1,276,030.82

The British America Elevator Company, Ltd., in 1922 owned 100 per cent of the stock of the Port Arthur Elevator Company, Ltd., a Canadian corporation.

The undivided profits of the British America Elevator Company, Ltd., shown above, included dividends received by the British America Elevator Company, Ltd., from its subsidiary the Port Arthur Elevator Company, Ltd., which were not subject to Canadian income tax to the British America Elevator Company, Ltd., as follows:

Fiscal year July 16, 1920, to July 15, 1921 .. $530,000.00 Fiscal year July 16, 1921, to June 30, 1922 .. 425,000.00 ___________ Total ..................................... $955,000.00

On amended Form 1118, "Claim for credit on corporation income-tax return for taxes paid or accrued to a foreign country or a possession of the United States," attached to claim for refund of $29,112.87, hereinbefore referred to, the accounts of the British America Elevator Company, Ltd., and its subsidiary the Port Arthur Elevator Company, Ltd., were consolidated for the purpose of arriving at the total tax paid on the undivided profits of both the British America Elevator Company, Ltd., and its subsidiary the Port Arthur Elevator Company, Ltd., from which the said dividends were paid the plaintiff by the British America Elevator Company, Ltd., as follows:

Consolidated Undivided Profits

Fiscal year July 16, 1920, to July 15, 1921: British America Elevator Co., Ltd. .................. $673,844.42 Port Arthur Elevator Co., Ltd. ....................... 266,673.47 ___________ Total .................... $940,517.89 Less dividend received by British America Elev. Co., Ltd., from Port Arthur Elev. Co., Ltd. ............. 530,000.00 ___________ $ 410,517.89 Fiscal year July 16, 1921, to June 30, 1922: British America Elevator Co., Ltd. .................. $608,147.67 Port Arthur Elevator Co., Ltd. ....................... 391,527.44 ___________ Total ....................... $999,675.11 Less dividend received by British America Elev. Co., Ltd., from Port Arthur Elev. Co., Ltd. ............. 425,000.00 ___________ $ 574,675.11

Fiscal year July 1, 1922, to June 30, 1923: British America Elevator Co., Ltd. ...... 201,379.77 _____________ Total .................................. $1,186,572.77 Converted to American Exchange at rate of 0.99535 ......................... 1,180,769.20

Income tax paid by the British America Elevator Company, Ltd., and its subsidiary the Port Arthur Elevator Company, Ltd., as follows:

Fiscal year July 16, 1920, to July 15, 1921: British America Elevator Co., Ltd. ........................... $14,678.80 Port Arthur Elevator Co., Ltd. 29,499.43 __________ $ 44,178.23 Fiscal year July 16, 1921, to June 30, 1922: British America Elevator Co., Ltd. ............................ $21,054.84 Port Arthur Elevator Co., Ltd. 44,066.17 __________ $ 65,121.01 Fiscal year July 1, 1922, to June 30, 1923: British America Elevator Co., Ltd. ......... 17,070.81 ____________ $126,370.05 Converted to American Exchange at rate of 0.99535 ................................. 125,782.43

Income tax paid to Canada by the British America Elevator Company, Ltd., and its subsidiary the Port Arthur Elevator Company, Ltd., on undivided profits from which dividends were paid to the plaintiff by the British America Elevator Company, Ltd., in the year 1922:

370,148.44 ------------ × $125,782.43, or ............. $39,430.28 1,180,769.20

The above figures are shown on Schedule D of amended Form 1118, "Claim for credit on corporation income-tax return for taxes paid or accrued to a foreign country or a possession of the United States," copy of which is attached to the stipulation of agreed facts on file herein.

The said claim for refund as filed by the plaintiff was therefore computed as follows:

Claim for credit (consolidated accounts of British America Elev. Co., Ltd., and Port Arthur Elev. Co., Ltd.), as shown above .. $39,430.28 Claim for credit (British America Elevator Company, Ltd.), as shown above ........... 10,317.41 __________ Difference ............................. $29,112.87

9. On May 21, 1927, the Commissioner of Internal Revenue rejected the plaintiff's claim for refund of $29,112.87.

10. On August 9, 1906, the plaintiff caused to be organized and duly incorporated under the provisions of "The companies act, 1902," of the statutes of the Dominion of Canada, the "British America Elevator Company, Ltd.," with an authorized capital stock of $500,000.00 divided into five thousand shares of $100.00 each, the plaintiff acquiring and retaining throughout the period involved herein a majority or 51 per cent. of the company's issued and outstanding capital stock. The purposes and objects of the organization of the said company as stated in the letters patent under which it was incorporated were in part as follows:

"(a) To construct, acquire, operate, hire, lease, mortgage, sell or otherwise dispose of elevators for elevating wheat, grain, or other produce, with the requisite docks, wharves, engines, plant, machinery, and appliances therefor, and also sheds, stores, and warehouses for the reception and storage of wheat, grain, and other produce, and any other goods, wares, merchandise, and effects, and generally to carry on an elevator and storage business, and in connection therewith to acquire by lease, license, purchase, or otherwise hydraulic, electric, or other power and to utilize the same and dispose of any surplus power; * * *

"(i) To use any of the funds of the company to purchase or otherwise acquire, and take and hold shares, bonds, or other securities of or in any company, and to promote and guarantee in whole or part the securities or obligations of any company having objects in whole or in part similar to those of this company, or carrying on or intending to carry on any business which the board of directors may deem of benefit to this company."

It was further provided that the operations of the company might be carried on throughout the Dominion of Canada and elsewhere and that the city of Winnipeg, in the Province of Manitoba, was to be the chief place of business of the company in the Dominion of Canada.

11. The business conducted by the British America Elevator Company, Ltd., was that of owning and operating so-called line elevators as distinguished from terminal elevators. The line elevators were located within the grain-producing areas, and the functions performed by elevators of that class were those of purchasing and receiving commodities from the producers and of forwarding them to the terminal elevators for resale or storage. The terminal elevators acted as warehousemen and were authorized to issue warehouse receipts.

12. In the forepart of the year of 1907 the plaintiff, which was a holding company rather than an operating company, leased an elevator at Port Arthur, Canada, which it desired to have operated as a terminal elevator. On July 4, 1907, which was within a short time after it had leased the Port Arthur elevator, the plaintiff caused to be incorporated under the laws of the Dominion of Canada the Port Arthur Elevator Company, Ltd., to operate the elevator at Port Arthur as a terminal elevator. The Port Arthur Elevator Company, Ltd., was organized with a capital stock of $100,000 divided into one thousand shares of the value of $100 each, all of which was owned by the British America Elevator Company, Ltd., from the time of its organization until its dissolution in or about the year 1927. The chief place of business of the Port Arthur Elevator Company, Ltd., was at Winnipeg, as was that of the British America Elevator Company, Ltd. The two companies occupied the same offices and had the same general manager. Separate sets of books were kept for the two companies.

The Port Arthur Elevator Company, Ltd., handled the grain of other line elevator companies in which the plaintiff was interested, as well as that of the British America Elevator Company, Ltd.

13. The Port Arthur Elevator Company, Ltd., for the fiscal year July 16, 1921, to June 30, 1922, paid $44,180.14 (converted to American exchange, $43,974.70) income tax to Canada on a net income of $422,763.31; for the fiscal year July 11, 1920, to July 15, 1921, it paid $29,499.43 (converted to American exchange $29,364.25) on a net income of $282,946.95; for the fiscal year July 11, 1919, to July 10, 1920, it paid a tax of $25,945.52 (converted to American exchange $25,824.87) on a net income of $249,100.29; and for the fiscal year July 11, 1918, to July 10, 1919, the tax paid was $28,833.88 (converted to American exchange $28,199.80) on a net income of $276,608.48.

14. The Port Arthur Elevator Company, Ltd., for the fiscal year July 16, 1921, to June 30, 1922, had accumulated or undivided profits available for dividends of $391,413.47 (converted to American exchange $389,593.39); for the fiscal year July 11, 1920, to July 15, 1921, undivided profits of $266,673.47 (converted to American exchange $265,433.33); for the fiscal year July 11, 1919, to July 10, 1920, undivided profits of $233,151.38 (converted to American exchange $232,068.22); and for the fiscal year July 11, 1918, to July 10, 1919, undivided profits of $249,684.53 (converted to American exchange $248,483.49).

15. The British America Elevator Company, Ltd., for the fiscal year, July 1, 1922, to June 30, 1923, paid $17,236.62 (converted to American exchange $17,156.46), income tax to Canada on a net income of $166,158.32; and for the same fiscal year had accumulated or undivided profits available for dividends of $201,453.14 (converted to American exchange $200,516.38).

Wm. J. Hogan, Jr., of Washington, D.C. (Simon Michelet, of Washington, D.C., on the brief), for plaintiff.

R.C. Williamson, of Washington, D.C., and Chas. B. Rugg, Asst. Atty. Gen., for the United States.

Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.


The plaintiff, a Minnesota corporation, sues to recover the sum of $29,112.87, corporation income tax, alleged to have been erroneously collected from the plaintiff for the calendar year 1922, together with interest thereon.

During the year 1922 the plaintiff owned 51 per cent. of the outstanding capital stock of the British America Elevator Company, Ltd., a corporation organized under the laws of the Dominion of Canada, which corporation in turn owned the entire 100 per cent. capital stock of the Port Arthur Elevator Company, Ltd., also a Canadian corporation.

During the year 1922 the plaintiff received cash dividends from the British America Elevator Company, Ltd., $159,375 on June 15, 1922, and $212,500 on September 18, 1922. These dividends converted into American exchange amounted to $370,148.44. The dividends were paid out of undivided profits of the British America Elevator Company, Ltd., as follows:

For the fiscal year ended July 15, 1921, $673,844.42, of which sum $530,000 was received as dividends from the Port Arthur Elevator Company, Ltd.; and for the year ended June 30, 1922, $608,147.67, of which amount $425,000 was received as a dividend from the Port Arthur Elevator Company, Ltd.

The dividends received by the British America Elevator Company, Ltd., from the Port Arthur Elevator Company, Ltd., were not subject to Canadian income tax to the British America Company. The American exchange value of the undivided profits of the British America Elevator Company, Ltd., from the Port Arthur Elevator Company, tiff, in 1922, was $1,276,038.82.

The British America Elevator Company, Ltd., paid income taxes to Canada for the fiscal years ending July 15, 1921, and July 15, 1922, respectively, the sums of $14,678.80 and $21,054.84, reduced when converted to American exchange to the sum of $35,567.47. The amount of income taxes paid to Canada by the British America Elevator Company, Ltd., on undivided profits from which dividends were paid plaintiff in the year 1922, was $10,317.41. The Commissioner of Internal Revenue credited the plaintiff with this amount on its 1922 taxes.

The plaintiff in this suit contends it is entitled to an additional credit of $29,112.87. It is urged: (1) That the plaintiff is entitled to credit as against its tax liability to the United States for the year 1922 for taxes paid to the Dominion of Canada by the Port Arthur Elevator Company, Ltd., whose entire stock was owned by the British America Elevator Company, Ltd., and (2) that plaintiff is entitled to credit for taxes paid to Canada by the British America Elevator Company, Ltd., for its fiscal year July 1, 1922, to June 30, 1922.

If it be held the plaintiff is right as to its first contention, it is entitled to recover its entire claim, $29,112.87. If it be held that plaintiff is right as to its second contention only, the plaintiff is entitled to recover the sum of $2,898.70. If it be held the plaintiff is not right as to either contention, it is not entitled to recover any sum.

Section 238(a) of the Revenue Act of 1921 ( 42 Stat. 258) provides that the tax of a domestic corporation shall be credited with the amount of any income war profits, and excess profits taxes paid during the taxable year to any foreign country. Section 238(e), provides: "For the purposes of this section a domestic corporation which owns a majority of the voting stock of a foreign corporation from which it receives dividends (not deductible under section 234) in any taxable year shall be deemed to have paid the same proportion of any income, war-profits, or excess-profits taxes paid by such foreign corporation to any foreign country * * *, upon or with respect to the accumulated profits of such foreign corporation from which such dividends were paid, which the amount of such dividends bears to the amount of such accumulated profits. * * * The term `accumulated profits' when used in this subdivision in reference to a foreign corporation, means the amount of its gains, profits, or income in excess of the income, war-profits, and excess-profits taxes imposed upon or with respect to such profits or income; and the Commissioner * * * shall have full power to determine from the accumulated profits of what year or years such dividends were paid; treating dividends paid in the first sixty days of any year as having been paid from the accumulated profits of the preceding year or years (unless to his satisfaction shown otherwise), and in other respects treating dividends as having been paid from the most recently accumulated gains, profits, or earnings. * * *"

Section 238(a) of the 1921 act gives a domestic corporation a right to a credit for the taxes paid by it to a foreign government. Section 238(e), however, indulges the presumption that a domestic corporation has paid that proportion of the taxes paid by a foreign corporation, in which it owns a majority of the voting stock, to any foreign government, which the dividends received by the domestic corporation bear to the accumulated profits of the foreign corporation, and allows the domestic corporation a credit therefor. The credit is entirely and directly dependent upon the ownership of a majority of the stock of the foreign corporation. The plaintiff owned no stock in the Port Arthur Elevator Company, Ltd., and received no dividends from that corporation. The British America Elevator Company, Ltd., and the Port Arthur Elevator Company, Ltd., are separate and distinct corporations, each bearing its own individual tax liability to the Dominion of Canada. Taxes paid by the Port Arthur Elevator Company to Canada cannot be held to have been taxes paid by a foreign corporation in respect to which the plaintiff is entitled, under section 238(e) of the 1921 Revenue Act, to credit on its tax liability to the United States.

Plaintiff contends, however, that section 240(d) of the 1921 act ( 42 Stat. 260), which provides "that in any case of two or more related trades or businesses (whether unincorporated or incorporated and whether organized in the United States or not) owned or controlled directly or indirectly by the same interests, the Commissioner may consolidate the accounts of such related trades and businesses, in any proper case, for the purpose of making an accurate distribution or apportionment of gains, profits, income, deductions, or capital between or among such related trades or businesses," is applicable to section 238(e) and permits the consolidation of the accounts of the British America Elevator Company, Ltd., and the Port Arthur Elevator Company, Ltd., for the purpose of computing the amount of credit allowable to plaintiff.

Article 637 of Treasury Regulations 62, interpreting section 240(d), provides: "This provision relates not to the payment of taxes, but to the determination of the true income of related trades or businesses, and thus indirectly to the amount of taxes which may be due under Title II and Title III of the statute."

The Bureau of Internal Revenue, following this regulation, has uniformly held that section 240(d) does not authorize the consolidation of the accounts of related trades or businesses for the purpose of computing the amount of credit allowable under section 238(e) for income tax paid to a foreign country. The bureau has likewise consistently held that taxes paid by a foreign subsidiary of a foreign subsidiary may not be claimed by a domestic corporation under this statute. The construction placed by the bureau on the statutes involved, and its long-continued and uniform practice in the computation of allowable credits thereunder, should not be disturbed unless plainly wrong. Universal Battery Co. v. United States, 281 U.S. 580, 50 S. Ct. 422, 74 L. Ed. 1051. We think the construction placed upon section 238(e) and 240(d) of the 1921 act by the Bureau of Internal Revenue is correct, and therefore hold the plaintiff is not entitled to have considered in the computation of the amount of credit allowable against its 1922 taxes, the taxes paid to Canada by the Port Arthur Elevator Company, Ltd.

The plaintiff's second contention is that, entirely apart from whether it is entitled to have the taxes paid by the Port Arthur Elevator Company, Ltd., consolidated with the taxes paid by the British America Elevator Company, Ltd. in computing plaintiff's allowable credit for the year 1922, it is entitled to an additional credit of $2,898.70, because of the payment of taxes amounting to $17,070.81 to Canada by the British America Elevator Company, Ltd., for its fiscal year July 1, 1922, to June 30, 1923.

The plaintiff kept its accounts and paid income taxes on a calendar-year basis. The British America Elevator Company, Ltd., kept its books, and paid income taxes on a fiscal-year basis, its fiscal year ending on June 30. The plaintiff received on September 18, 1922, a dividend of $212,500 from the British America Elevator Company, Ltd. The payment of the dividend was within the plaintiff's calendar year 1922, but was within the British America Elevator Company, Ltd.'s, fiscal year July 1, 1922, to June 30, 1923. The Commissioner of Internal Revenue in computing the credit plaintiff was entitled to have against its 1922 taxes included the dividend of $212,500, but did not take into consideration in his computation the $17,070.81 taxes paid by the British America Co., Ltd., or its accumulated profits for the fiscal year ending June 30, 1923.

The credit authorized by section 238(e) is expressly limited to "taxes paid by such foreign corporation to any foreign country * * *, upon or with respect to the accumulated profits of such foreign corporation from which such dividends were paid." The plaintiff's right to have the $17,070.81 taxes paid by the British America Elevator Company, Ltd., for its fiscal year ending June 30, 1923, included in the computation of its allowable credit for 1922 turns upon whether or not such taxes were paid upon accumulated profits from which the dividend of $212,500 was paid on September 18, 1922.

It is not shown in the record, and the court is not able to determine, whether the whole, or any part, of the taxes paid by the British America Elevator Company, Ltd., for its fiscal year July 1, 1922, to June 30, 1923, was paid on accumulated profits from which the $212,500 dividend was paid. Neither is it shown what part, if any, of the accumulated profits of the British America Elevator Company Ltd., for its fiscal year July 1, 1922, to June 30, 1923, was earned during that period of the fiscal year beginning July 1, 1922, to September 18, 1922, the date on which the dividend was paid.

Section 238(e) vests the commissioner, with the approval of the secretary, with "full power to determine from the accumulated profits of what year or years such dividends were paid; treating dividends paid in the first sixty days of any year as having been paid from the accumulated profits of the preceding year or years (unless to his satisfaction shown otherwise), and in other respects treating dividends as having been paid from the most recently accumulated gains, profits, or earnings." The dividend in question was paid more than sixty days after July 1, 1922, the beginning of the British America Elevator Company's fiscal year; therefore it must be treated as having been paid out of the most recently accumulated profits earned prior to the date of payment. The Commissioner of Internal Revenue, in the absence of a showing that the dividend was paid out of the accumulated profits earned by the said company in that part of its fiscal year preceding the date of payment, properly held that such dividend was paid from accumulated profits earned in the previous year or years. The plaintiff has been given proper credit for the taxes paid by the British America Elevator Company, Ltd., with respect to its accumulated profits of the two fiscal years ending July 15, 1921, and June 30, 1922, from which plaintiff received the dividends in question. Its claim that it is entitled to a further credit of $2,898.70 is without merit.

The plaintiff is not entitled to recover, and the petition is therefore dismissed. It is so ordered.


Summaries of

F.H. Peavey Co. v. United States

Court of Claims
Jan 18, 1932
55 F.2d 516 (Fed. Cir. 1932)

In F.H. Peavey & Co. v. United States, 55 F.2d 516 (Ct. Cl. 1932), it was held under section 238(e) of the Revenue Act of 1921 (which is in all material respects the same as section 131(f) of the Internal Revenue Code of 1939) that for the purpose of foreign tax credit, the dividend should be considered as having been paid out of the accumulated earnings and profits as of the beginning of the year in which it was paid absent any showing of the amount of the accumulated earnings and profits at the date the distribution was made.

Summary of this case from Steel Improvement & Forge Co. v. Comm'r of Internal Revenue
Case details for

F.H. Peavey Co. v. United States

Case Details

Full title:F.H. PEAVEY CO. v. UNITED STATES

Court:Court of Claims

Date published: Jan 18, 1932

Citations

55 F.2d 516 (Fed. Cir. 1932)

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