Southport Mill, Ltd. v. Commissioner

Fifth Circuit

Southport Mill, Ltd. v. Commissioner

38 F.2d 986, 8 A.F.T.R. (P-H) 10463, 1930 U.S. App. LEXIS 2433, 1930 U.S. Tax Cas. (CCH) 9223

CourtCourt of Appeals for the Fifth Circuit

DecidedMarch 15, 1930

DocketNo. 5564

StatusPublished

This text of 38 F.2d 986 (Southport Mill, Ltd. v. Commissioner) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Southport Mill, Ltd. v. Commissioner, 38 F.2d 986, 8 A.F.T.R. (P-H) 10463, 1930 U.S. App. LEXIS 2433, 1930 U.S. Tax Cas. (CCH) 9223 (5th Cir. 1930).

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Opinion

BRYAN, Circuit Judge.

On a former petition for review in this case, we affirmed a decision of the United States Board of Tax Appeals which excluded from invested capital of petitioner two amounts, one for $109,000 and one for $197,-500, and classified those amounts as borrowed capital. The Revenue Act of 1918, in force during the period involved, by section 326, includes as invested capital paid-in surplus, but excludes borrowed capital. 40 Stat. 1092. Petitioner agreed to pay to the stockholders who advanced the sums above mentioned 6 per cent, per annum, which, though designated as dividends, we also held was interest. The borrowed capital was finally paid by petitioner to the stockholders who were entitled to it, but without interest. (C. C. A.) 26 F.(2d) 17. Petitioner’s president testified that he was uncertain whether the interest or so-called dividends had been waived.

As appears from our former opinion, petitioner was then contending that at least it was entitled to a deduction for interest from/ income, but the question of allowance for interest was not then an issue, and, besides, as just stated, it did not appear definitely whether or not interest had been waived. The decision was therefore affirmed, but without prejudice to the petitioner to make application for an allowance on account of interest on burrowed capital. On the going down of the mandate, the Board of Tax Appeals allowed the petition to be amended so as to claim interest, but refused to admit any evidence in support of it.

The affirmance of the Board’s decision without prejudice to the petitioner’s right to apply for interest was for the purpose of enabling petitioner to show if it could that it was entitled to interest. The mere privilege to file an amended petition without more would have been a futile thing. The affirmance without prejudice operated to leave the amended petition unembarrassed by what had gone before, and at the same time to preserve to the government the right to make any defense it had. Taylor v. Slater, 21 R. I. 104, 41 A. 1001. The record is not in such shape as that we could finally determine whether there should be an allowance for interest.

The petition for review is granted, and the cause is remanded, with directions to the Board of Tax Appeals to pass upon petitioner’s amended petition upon its merits.

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BRYAN, Circuit Judge.

On a former petition for review in this case, we affirmed a decision of the United States Board of Tax Appeals which excluded from invested capital of petitioner two amounts, one for $109,000 and one for $197,-500, and classified those amounts as borrowed capital. The Revenue Act of 1918, in force during the period involved, by section 326, includes as invested capital paid-in surplus, but excludes borrowed capital. 40 Stat. 1092. Petitioner agreed to pay to the stockholders who advanced the sums above mentioned 6 per cent, per annum, which, though designated as dividends, we also held was interest. The borrowed capital was finally paid by petitioner to the stockholders who were entitled to it, but without interest. (C. C. A.) 26 F.(2d) 17. Petitioner’s president testified that he was uncertain whether the interest or so-called dividends had been waived.

As appears from our former opinion, petitioner was then contending that at least it was entitled to a deduction for interest from/ income, but the question of allowance for interest was not then an issue, and, besides, as just stated, it did not appear definitely whether or not interest had been waived. The decision was therefore affirmed, but without prejudice to the petitioner to make application for an allowance on account of interest on burrowed capital. On the going down of the mandate, the Board of Tax Appeals allowed the petition to be amended so as to claim interest, but refused to admit any evidence in support of it.

The affirmance of the Board’s decision without prejudice to the petitioner’s right to apply for interest was for the purpose of enabling petitioner to show if it could that it was entitled to interest. The mere privilege to file an amended petition without more would have been a futile thing. The affirmance without prejudice operated to leave the amended petition unembarrassed by what had gone before, and at the same time to preserve to the government the right to make any defense it had. Taylor v. Slater, 21 R. I. 104, 41 A. 1001. The record is not in such shape as that we could finally determine whether there should be an allowance for interest.

The petition for review is granted, and the cause is remanded, with directions to the Board of Tax Appeals to pass upon petitioner’s amended petition upon its merits.

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38 F.2d 986, 8 A.F.T.R. (P-H) 10463, 1930 U.S. App. LEXIS 2433, 1930 U.S. Tax Cas. (CCH) 9223, Counsel Stack Legal Research, https://law.counselstack.com/opinion/southport-mill-ltd-v-commissioner-ca5-1930.

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