# Shipley School v. Commissioner > United States Board of Tax Appeals · June 25, 1926 · 4 B.T.A. 239 URL: https://www.frixlaw.com/law-library/cases/4622629 ## Case - **Full name:** APPEAL OF THE SHIPLEY SCHOOL. - **Court:** United States Board of Tax Appeals - **Decided:** June 25, 1926 - **Citations:** 4 B.T.A. 239; 1926 BTA LEXIS 2343 - **Precedential status:** Published - **Opinion:** Opinion - **Judges:** Lansdon, Aiiundell - **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/4622629 ## Opinion text APPEAL OF THE SHIPLEY SCHOOL. Shipley School v. Commissioner Docket No. 6494. United States Board of Tax Appeals 4 B.T.A. 239 ; 1926 BTA LEXIS 2343 ; June 25, 1926 , Decided Submitted March 10, 1926 . *2343 Pierce Archer, Jr., Esq., for the petitioner. J. A. Adams, Esq., for the Commissioner. *239 Before ARUNDELL and LANSDON. The Commissioner has determined deficiencies in income and profits taxes for the fiscal years ended June 30, 1920, and June 30, 1921, in the respective amounts of $125.50 and $2,753.32, or a total of $2,878.82, all of which is in controversy. The sole issue raised by the petitioner is that the Commissioner erred in refusing to classify it as a personal service corporation for each of the taxable years. FINDINGS OF FACT. The petitioner is a Pennsylvania corporation with its principal office at Bryn Mawr, where it conducts a boarding and day school for girls. It was chartered in 1911, with an authorized capital of $25,000, divided into 500 shares of the par value of $50 each, all of which were issued for value. During the taxable years the stock was owned as follows: Eleanor O. Brownell 248 1/2 shares; Alice G. *240 Howland 248 1/2 shares; Thomas F. Branson 3 shares. It is the successor of the Misses Shipley's School, established in 1893 by Hannah T. Shipley, Elizabeth A. Shipley, and Katharine M. Shipley, and conducted *2344 by them until 1911 as a joint venture. Resulting from a series of contracts, the first made in 1911, all duly accomplished on terms not material to the issue here involved, Alice G. Howland and Eleanor O. Brownell acquired all the stock of the petitioner, except the qualifying shares issued to Branson, and all the real property used in connection with the school at a cost of approximately $175,000. The real property consists of about 2.28 acres of land and the various school buildings used by the petitioner. This property is not owned by the petitioner, but is leased by it from Howland and Brownell at a rental that was fixed at $10,000 per annum during the taxable years. Howland and Brownell are president and secretary-treasurer, respectively, of the petitioner and co-principals of the school. Each devoted her entire time to the business of the petitioner during the years in question. Howland supervised the housekeeping, looked after the health of the resident pupils, had charge of maintenance and repairs of the building and the purchase of new materials and furnishings, had the care of the grounds, interviewed all parents of pupils who visited the school, engaged all teachers, *2345 planned the courses of study followed in the instruction of pupils, and performed many other duties incident to the academic activity of the petitioner. Brownell interviewed new teachers and arranged for their work, represented the school whenever it was necessary to use the services of an attorney, looked after the payment of interest and taxes and other financial matters in connection with the business operations of the petitioner, had charge of relationships with colleges, visited colleges attended by former students of the school, and shared with Howland in responsibility for the maintenance of discipline and order among the pupils and teachers. During the year ended June 30, 1920, the petitioner had 78 boarding pupils and 125 day pupils. For that year the charge for boarding pupils was $1,200 and for day pupils $200 a year for the younger and $300 for the older girls, and the gross income from these sources amounted to $124,850. During the year ended June 30, 1921, the petitioner had 80 boarding pupils and an average of 148 day pupils, and the fees received were unchanged, except that the charge for boarders was increased to $1,400, and the income from such fees amounted *2346 to $149,000. During the taxable years the petitioner employed 22 and 26 teachers, respectively, and paid salaries thereto in the respective amounts of $29,951.55 and $39,268.62. Practically all teachers engaged in classroom work were graduates of institutions of higher education. *241 The petitioner's income and deductions therefrom for each of the taxable years were as follows: Fiscal year ending June 30, 1920. Fiscal year ending June 30, 1921. GROSS INCOME Tuition and board $123,563.11 $147,766.25 Special lessons (piano, etc.) 1,224.43 1,439.69 Interest 651.86 283.01 Other income (books, pins, etc.) 2,598.86 4,662.57 128,038.26 154,151.52 DEDUCTIONS. Teachers' salary (nonstockholders) 29,951.55 39,268.62 Servants' wages and other salaries (nonstockholders) 25,573.62 30,457.25 Salaries to stockholders 13,000.00 13,000.00 Provisions 20,115.96 15,455.30 Rent 10,000.00 10,000.00 Coal 3,551.75 3,146.39 Advertising 1,479.32 355.77 Cottage and farm expense 1,181.29 3,597.82 Insurance 532.47 2,290.88 Telephone and telegraph 508.94 542.04 Auto and garage expense 559.19 1,310.67 Taxes 1,030.27 965.38 Depreciation 3,316.74 4,169.31 Repairs 6,701.84 4,491.59 Renewals 548.25 337.07 Other expenses 6,732.09 12,287.27 124,783.28 141,675.36 Net income 3,254.98 12,476.16 *2347 The petitioner's balance sheets at June 30 of each of the fiscal years involved are as follows: June 30, 1919. June 30, 1920. June 30, 1921. ASSETS Cash $1,136.26 $573.20 $1,620.94 Accounts receivable 5,339.49 4,501.97 2,099.42 Inventories 6,002.99 4,582.34 10,294.74 Deferred charges 960.84 1,331.52 Furnishings and equipment 40,847.31 45,132.00 48,030.73 Permanent improvements 474.59 2,018.29 3,634.83 53,800.64 57,768.64 66,912.18 LIABILITIES. Bills payable 3,000.00 Accounts payable 814.86 7,801.14 7,031.65 Accrued liabilities 2,825.21 688.67 409.75 Reserve for depreciation 14,508.57 17,825.31 21,994.62 Capital stock 25,000.00 25,000.00 25,000.00 Surplus 10,652.00 3,453.52 12,476.16 Total 53,800.64 57.708.64 66,912.18 *242 Fees for tuition and board charged by the petitioner are payable in advance for each half term and are collected not later than the end of the first five weeks of each such term. Capital was a material income-producing factor. Judgment for the Commissioner. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/4622629. Public record. Not legal advice.