The opinion
ARCHBOLD GIGER CO., INC., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Archbold Giger Co. v. Commissioner
Docket No. 15070.
United States Board of Tax Appeals
16 B.T.A. 1043 ; 1929 BTA LEXIS 2461 ;
June 13, 1929 , Promulgated
*2461 William Surosky, Esq., and Andrew C. Frommelt, C.P.A., for the petitioner.
Otis J. Tall, Esq., for the respondent.
MARQUETTE
*1043 This proceeding is for the redetermination of deficiencies in income and profits taxes asserted by the respondent for the years 1920 and 1921 in the amounts of $15.76 and $2,155.73, respectively. The petitioner alleges that the respondent erred (1) in increasing net income for 1920 in the amount of $157.52 on account of insurance and (2) in disallowing a deduction for officer's salaries in the amount of $10,000 in 1921.
FINDINGS OF FACT.
The petitioner is a New Jersey corporation engaged in the wholesale flour business at Paterson, N.J.
During the year 1921 the capital stock of the petitioner, with the exception of two qualifying shares standing in the names of L. B. Meyer and Edward Gustenhoven, was owned and held by W. H. Giger and W. W. Archbold. Giger and Archbold were also officers of the corporation.
The regular salaries of Giger and Archbold for the year 1921 were $5,000 each, a total of $10,000. In its income and profits-tax return for that year the petitioner deducted $20,000 as the total salaries *2462 of Giger and Archbold. The additional salaries of $10,000 were, however, *1044 not entered on the petitioner's books until the year 1923 and were never drawn by Giger and Archbold. The record does not show whether the petitioner's books were kept on the accrual or cash receipts and disbursements basis.
The respondent, upon audit of the petitioner's return for the year 1921, disallowed the deduction claimed on account of said additional salaries of $10,000.
OPINION.
MARQUETTE: The petitioner claims that in computing its net income for the year 1921 it is entitled to deduct the amount of $20,000 as salaries to Archbold and Giger. The respondent has allowed as a deduction $10,000 of the salaries claimed, but denies that the additional salaries of $10,000 were authorized or paid in the year 1921, or that they were reasonable in amount.
W. H. Giger testified that he and Archbold were the only persons really interested in the petitioner; that the board of directors, of which he and Archbold were members, usually held informal instead of formal meetings, and that some time during the year 1921 at one of these informal meetings additional salaries of $10,000 - $5,000, *2463 each, were authorized for him and Archbold and that he was unaware of any reason for not entering them in the books until 1923. He admitted that the additional salaries were not drawn by him and Archbold because "we never could see our way clear to take the money out." L. B. Meyer, who was secretary of the petitioner during the year 1921, testified that he attended the meetings of the directors; that he was familiar with whatever action was taken by them with regard to salaries, and that he did not recall that any additional salaries were authorized for Giger and Archbold.
The testimony is conflicting as to whether there ever was in fact any authorization of additional salaries for Giger and Archbold in the year 1921. The evidence is clear, however, that the additional salaries in question were not entered on the petitioner's books until the year 1923, and that they were in fact never drawn. Furthermore, the record is silent as to whether the petitioner's books were kept on the accrual or cash receipts and disbursements basis.
The respondent denies that he erred in computing the petitioner's income for the year 1920 and the evidence is insufficient to support the allegations *2464 of the petition.
On the record we must affirm the determination of the respondent.
Judgment will be entered for the respondent.