Appeal of Hayes Textile Co.

4 B.T.A. 1274

• Court: United States Board of Tax Appeals
• Decided: September 30, 1926
• Docket: Docket No. 844
• Status: Published

Opinion

OPINION.

Littleton:

The Hayes Knitting Co. and the Hayes Textile Co. were affiliated corporations throughout the year 1918 and remained affiliated until the Hayes Knitting Co. was dissolved in 1920. All of the ■ stock of the two companies was owned and controlled by Thomas J. Hayes. The net income and invested capital of the two companies for 1918 should have been determined upon the basis of a consolidated return.

When it was determined at the time of filing the return for 1918 that there had been a substantial reduction of the December 31, 1918, inventory of the Hayes Knitting Co., as evidenced by a disposition thereof by the Hayes Textile Co., which took over the inventory on January 1, 1919, the net income for 1918 should have been reduced by the inventory loss, amounting to $18,417.92. The fact that the Hayes Knitting Co. transferred its inventory to the Hayes Textile Co., with which company it was affiliated, did not operate to prevent the consolidated group from receiving the benefit of the inventory loss under section 234(a) (14) (a) of the Revenue Act of 1918.

Judgment for the petitioner. Order of re-determination will be entered on 15 days' notice, under Rule 50.