The opinion
SPARK HOTEL CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Spark Hotel Co. v. Commissioner
Docket No. 7761.
United States Board of Tax Appeals
5 B.T.A. 186 ; 1926 BTA LEXIS 2938 ;
October 26, 1926 , Decided
*2938 The petitioner was not a personal service corporation within section 200 of the Revenue Act of 1918.
Arnold Markel, C.P.A., for the petitioner.
J. F. Greeney, Esq., and J. Arthur Adams, Esq., for the respondent.
MURDOCK
*186 This appeal was submitted to the Board upon petition and answer, and a stipulation of the facts. There was no oral hearing or argument, and no briefs were filed. The taxes in controversy are income *187 and excess-profits taxes for the calendar year 1919 in the amount of $1,355.74. The single question involved is whether the petitioner was, during the period in question, a personal service corporation, as defined in section 200 of the Revenue Act of 1918.
FINDINGS OF FACT.
The petitioner was incorporated in the State of New York on June 3, 1913. Its principal office is at 182 St. Nicholas Avenue, New York, N.Y. The authorized capital stock of the corporation, all of which is issued and outstanding, consists of 50 shares of common stock each share having a par value of $100. In 1919, Morris Spark owned one share and Annie Spark, his wife, owned the remaining 49 shares. Annie Spark was president and *2939 Morris Spark was secretary and treasurer. The directors were Annie Spark, Morris Spark and Jacob Spark. The corporation operated two hotels: The Grampion Hotel, New York, N.Y., a seven-story brick building containing 100 rooms, open all year, rooms rented by the day, month or year on the European plan, without meals; the La Reine Hotel, at Bradley Beach, N.J., a four-story frame building containing 120 rooms, open from June 15 to September 15, rooms rented by the day, week or season on the American plan, including meals. The former was operated on a leasehold, running for five years at an annual rental of $9,000, expiring in 1921. The latter was operated on a leasehold running for three years at an annual rental of $9,000, expiring in 1920. Additional rooms and cottages to take care of the overflow guests were rented at Bradley Beach, N.J., in 1919, for $2,608.50.
Morris Spark spent his entire time in personally supervising the rooms and desk service. Annie Spark had charge of the dining room and kitchen, and spent all of her time in personally supervising the dining room and the purchase and preparation of all foods.
Employees of the company other than Morris Spark and *2940 Annie Spark were as follows:
Grampion Hotel:
4 maids.
2 elevator men.
1 engineer.
La Reine Hotel:
20 waitresses.
10 kitchen help.
8 chamber-maids.
5 bell-boys and porters.
2 desk clerks.
The details of operations during the year 1919 were as follows: INCOME:
Room and board $103,243.50
Cigar stand income 1,732.90
Miscellaneous income from concessions 952.18
Total income 105,928.58
Total income $105,928.58
EXPENSES:
Salaries and wages $21,103.58
Provisions 25,233.00
Restaurant 622.69
Cigar stand 1,254.82
Coal 2,835.65
Light 1,669.85
Laundry 1,144.48
Furnishings 2,878.15
Advertising 52.50
Postage 54.69
Stationery and printing 322.19
Freight and express 227.62
Miscellaneous supplies 1,498.52
Telephone 724.60
General expense 1,337.32
Rent 20,608.50
Insurance 151.85
Water 281.67
Officers' salaries 12,000.00
Repairs 4,274.41
Bad debts 140.93
Total expenses 98,417.02
Net taxable income as shown in deficiency letter 7,511.56
*188 The balance sheets at the beginning and end of 1919 were as follows: January 1, 1919.
ASSETS:
Cash $5,334.47
Loans 1,268.91
Deposits 819.78
Due from guests 61.48
Furniture and fixtures 2,500.00
$9,984.64
LIABILITIES:
Accounts payable 1,877.26
Rent accrued 1,875.00
M. Spark 1,623.53
5,375.79
CAPITAL:
Capital stock 5,000.00
Deficit 391.15
4,608.85
December 31, 1919.
ASSETS:
Cash $1,713.04
Loans 1,112.85
Deposits 819.78
Furniture and fixtures 2,500.00
M. Spark 9,754.36
15,900.03
LIABILITIES:
Accounts payable $108.99
Rent accrued 1,875.00
Salaries accrued 1,771.40
$3,755.39
CAPITAL:
Capital stock 5,000.00
Surplus 7,144.64
12,144.64
*2941 *189 OPINION.
MURDOCK: If any corporation operating a hotel fulfills the requirements of a personal service corporation, as defined in section 200 of the Revenue Act of 1918, it is most exceptional, but certainly the present petitioner fails to fulfill those requirements. ; ; .
Judgment will be entered for the Commissioner.