Appeal of Edward Rose Co.

2 B.T.A. 341

• Court: United States Board of Tax Appeals
• Decided: July 14, 1925
• Docket: Docket No. 2092
• Status: Published

Opinion

OPINION.

Littleton:

The Commissioner concedes that the Fibre Company and the Eetaining. Company were affiliated during the year 1919, and that they were affiliated with the taxpayer, the Edward Nose Co., from October 1, 1919, to December 31, 1919. He contends that the three companies were not affiliated before October 1, 1919. The taxpayer admits that the three companies were not affiliated during the period January 1 to April 1, 1919. Therefore, the only question for determination is whether or not they were affiliated during the period April 1 to October 1, 1919.

The evidence clearly establishes the fact that from April 1 to October 1, 1919, Edward Rose owned all of the voting stock of the Edward Rose Co., 35 per' cent of the stock of the Fibre Company, and 30 per cent of the stock of the Retaining Company. In addition, he actually held and controlled 10 per cent of the stock of the Fibre Company and 15 per cent of the stock of the Retaining Company, which stood in the names of Henry Rose and I. G. Mann. Fifty per cent of the stock of the Fibre Company and the Retaining Company stood in the name of J. R. Fradd.

On April 1, 1919, Rose agreed to purchase Fradd’s stock, and Fradd agreed to sell it to Rose at a price then and there determined. For financial reasons it was also agreed that Fradd should retain actual possession of the stock until such time as Rose could pay the purchase price, but that Rose should immediately be placed in full and complete control of the two corporations, and would vote the stock in question in such manner as he might desire. The agreement was fully performed on both sides, Rose being in control of the corporations on and after April 1, 1919. It did not become necessary for Rose to require the voting of Fradd’s stock. He, however, from the time the agreement with Fradd was made, controlled the stock standing in Fradd’s name and, through such control, directed the affairs of the two corporations.

Upon careful consideration of the evidence in this appeal, we are of the ojfinion that from April 1 to October 1, 1919, Edward Ross owned all of the voting stock of the Edward Rose Co., and that he owned or controlled at least 95 per cent of the voting stock of the Fibre Company and the Retaining Company, and that, therefore, the three companies were affiliated during the period April 1 to October 1, 1919.

In its petition, the taxpayer alleges that the Commissioner erred in failing to apply the provisions of sections 327 and 328 of the Revenue Act of 1918 in determining its profits tax for the year 1919. It has not, however, presented any evidence in support of its claim for assessment under those sections, and the action of the Commissioner in regard thereto is approved.