The opinion
CORBETT & STUART, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Corbett & Stuart v. Commissioner
Docket No. 11855.
United States Board of Tax Appeals
11 B.T.A. 540 ; 1928 BTA LEXIS 3786 ;
April 12, 1928 , Promulgated
*3786 The invested capital of a corporation may not be reduced in determining the extent to which a dividend is paid from current earnings of a year by a "tentative tax" theoretically set aside out of such earnings pro rata over such year, because the income and profits tax does not become due and payable and, therefore, does not accrue until the following year.
William Cogger, Esq., for the petitioner.
A. C. Baird, Esq., for the respondent.
SMITH
*540 This is a proceeding for the redetermination of a deficiency in income and profits tax for 1919 of $4,111.01. All of the issues raised by the petition have been waived with the exception of those pertaining to the computation of the invested capital with respect to the correct amount of taxes due for the years 1916, 1917, and 1918. The petitioner alleges that the tax liability of prior years was computed by reducing invested capital for prior years by a "tentative tax" in the determination of the amount of earnings available for the payment of dividends at several dividend dates.
FINDINGS OF FACT.
In the determination of invested capital for 1919 the respondent reduced surplus shown by the *3787 books at the beginning of the year by *541 dividends paid during the year; at each dividend date it was assumed that a tax had accrued upon the earnings up to the date of the dividend, and that the deduction from the estimated earnings of the estimated tax required that the petitioner encroach upon surplus for the amount of the dividend.
OPINION.
SMITH: The question presented by this proceeding has been before the Board in , wherein we held that the invested capital of a corporation might not be reduced in determining the extent to which a dividend is paid from current earnings of a year by a "tentative tax" theoretically set aside out of such earnings pro rata over such year. The position there taken was reaffirmed in All . These decisions are controlling in this case.
Judgment will be entered on 15 days' notice, under Rule 50.