Virginia Loan & Thrift Corp. v. Commissioner
This text of 2 T.C.M. 27 (Virginia Loan & Thrift Corp. v. Commissioner) is published on Counsel Stack Legal Research, covering United States Tax Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
Memorandum Opinion
TURNER, Judge: The respondent has determined deficiencies in personal holding company surtax and penalties against the petitioner as follows:
| Docket | |||
| No. | Year | Surtax | Penalty |
| 109821 | 1935 | $ 341.56 | $ 85.39 |
| 109822 | 1938 | 569.54 | 142.39 |
| 109822 | 1939 | 1,657.44 | 414.36 |
| 109822 | 1940 | 1,428.23 | 357.06 |
The questions presented are (1) whether 80 per cent of the petitioner's income consisted of interest classified as personal holding company income; (2) whether the petitioner is liable for any delinquency penalties; and (3) whether section 182 of the Revenue Act of 1942 applies to the petitioner.
The case was submitted on a stipulation of facts and the facts are found as stipulated.
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The petitioner filed its income tax returns for the calendar years 1935, 1938, 1939 and 1940 with the Collector of Internal Revenue at Richmond, Virginia.
The petitioner was organized in the State of Virginia in 1926 under the Industrial Loan Associations Act of 1920 as amended (Sections 4168(1)-4168(11) of the Code of Virginia). *312 The petitioner is subject to the supervision of the State Banking Department and is regularly examined by a state bank examiner. Its certificate of incorporation, to the extent material, reads as follows:
This is to certify that we do hereby associate ourselves to establish a corporation under and by virtue of Chapters 147 and 148 of the Code of Virginia, 1919, and the acts amendatory thereof and supplementary thereto, for the purposes and under the corporate name hereinafter mentioned, and to that end we do by this, our certificate, set forth as follows:
The name of the corporation is to be the Virginia Loan & Thrift Corporation.
The principal office of the corporation is to be at Winchester, Frederick, Virginia.
The purposes for which this corporation is formed are:
(a) To lend money to any person, firm or corporation, to be repaid in periodical installments or otherwise, upon the applications of such persons, firms or corporations, unsecured or secured by deed of trust, pledge or lien on property, real and personal.
(b) To buy, sell and negotiate notes, [*] and other obligations for the payment of money, and to guarantee the*313 payment thereof.
(c) To make such charges for loans and for services for investigation of credit in connection therewith as shall be proper and not prohibited by law.
(d) To subscribe to, purchase or otherwise acquire, and to own, hold, sell and to guarantee or become surety in respect to the stock, bonds or other securities and obligations of other companies or corporations, and while the owner of any such securities to exercise all of the incidents of ownership, including the right to vote thereon.
(e) To have all the powers conferred by Chapter 74 of the Acts of the General Assembly of Virginia, 1920, relating to Industrial Loan Associations, to do and to perform any and all acts and things necessary or convenient in carrying on the business of a loan and investment corporation, and in addition thereto to exercise all the general powers conferred upon corporations under the provisions of Chapter 147 and 148 of the Code of Virginia, 1919.
(f) To purchase or otherwise acquire and to hold, reissue and sell shares of its own capital stock and to lend or advance money thereon.
During the taxable years the petitioner's stock was owned by from 29 to 38 individuals, but more than *314 50 per cent in value of its capital stock was owned by not more than 5 individuals under the rule of constructive ownership.
The petitioner lends money on co-maker notes and on collateral notes. It had about one thousand loans outstanding in the taxable years, of which about 90 per cent were for amounts of less than $300. All loans bear interest payable in advance, at the rate of 6 per cent per annum. If a loan is paid prior to maturity, the interest charge is proportionately reduced. In addition to the interest charge, the petitioner charges 2 per cent of the amount of a loan as a statutory investigation fee. This fee is charged regardless of the length of time of the loan, and is payable in advance. The full fee is collected whether the loan is paid prior to maturity or not, as it is not based on units of time.
The petitioner has always separated its income from investigation fees from other income in its profit and loss statements. The reports of the bank examiner divide the petitioner's income into "Income from loans and investments" and "Other earnings." The investigation fees are included as "Other earnings." The petitioner received income during the taxable years as follows: *315