American Varnish Co. v. Commissioner

2 B.T.A. 201, 1925 BTA LEXIS 2476

• Court: United States Board of Tax Appeals
• Decided: June 30, 1925
• Docket: Docket No. 2253.
• Status: Published

Opinion

OPINION.

James:

The provisions of section 236, material to this issue, read as follows:

See. 236. That for the purpose only of the tax imposed by section 230 there shall be allowed the following credits:

* * * * * * *

(b) In the ease of a domestic corporation the net income of which is $25,000 • or less, a specific credit of $2,000; * * *.

Net income is defined in section 232 as “ the gross income as defined in section 233 less the deductions allowed by section 234.” Among the deductions listed in section 234, the net loss of the preceding year is not included. Provision is made specially for this further reduction of taxable net income in section 204. The provisions of that section material here are contained in section 204 (b), which reads in full as follows:

(b) If for any taxable year beginning after December 31, 1920, it appears upon the production of evidence satisfactory to the Commissioner that any taxpayer has sustained a net loss, the amount thereof shall be deducted from the net income of the taxpayer for the succeeding taxable year; and if such net loss is in excess of the net income for such succeeding taxable year, the amount of such excess shall be allowed as a deduction in computing the net income for the next succeeding taxable year; the deduction in all cases to be made under regulations prescribed by the Commissioner with the approval of the Secretary.

The taxes on corporations are imposed under the Revenue Act of 1021 by section 230, the material portion of which reads:

* * * there shall be levied, collected, and paid for each taxable year upon the net income of every corporation a tax at the following rates: * * *

This section imposes a tax upon the net income, and net income is defined as gross income less certain deductions which do not include the net loss allowed to be deducted under section 204. In like manner section 236 grants a specific credit to corporations the net income of which does not exceed $25,000, and denies that benefit to corporations the net income of which does exceed that amount.