# Hower & Seaman, Inc. v. Commissioner

> United States Board of Tax Appeals · July 20, 1926 · 4 B.T.A. 261

URL: https://www.frixlaw.com/law-library/cases/4497347

## Case

- **Full name:** APPEAL OF HOWER & SEAMAN, INC.
- **Court:** United States Board of Tax Appeals
- **Decided:** July 20, 1926
- **Citations:** 4 B.T.A. 261; 1926 BTA LEXIS 2319
- **Precedential status:** Published
- **Opinion:** Opinion of the court by Smith
- **Judges:** Littleton, Smith, Teussell
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/4497347

## Opinion text

*263 ORINION.
Smith
: The taxing statute permits a corporation to deduct from gross income all the “ ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered.” Section 234 (a) (1), Revenue Act of 1918.
In the instant proceeding the Commissioner contends that the amounts paid to the principal stockholders ostensibly as salaries were in excess of reasonable amounts for compensation and that they were in eífect a distribution of profits. From a consideration of the entire evidence ive are of the opinion that the amounts voted and paid as salaries constituted ordinary and necessary expenses of doing business and as such are deductible from gross income. It appears, however, that the resolution of the board of directors-of March 12, 1919, authorized the payment of salaries to each officer of $12,500 “ for the ensuing year.” The taxpayer’s return for the ten-month period ended December 31,1919, shows a deduction for salaries of officers of $25,000. The taxpayer admits error in making such deduction and now claims that the amount deducted should have been $20,833.33. The excess deduction of $4,106.67 was properly disallowed by the Commissioner.
Order of redetermination mil be entered on 15 days’ notice, under Bule 50.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/4497347. Public record. Not legal advice.