# Appendix — Ivan Allen Co. v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_0149%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1975 - **Citation:** 422 U.S. 617 ## Text Supreme Court, U. S. FILED APPENDIX JAN 30 1975 | MICHAEL RODAK, JR, 6.” | oe In the Supreme Court of the United States OCTOBER TERM, 1974 No. 74-22 IVAN ALLEN COMPANY, Petitioner, VS. UNITED STATES OF AMERICA, Respondent. On WRIT OF CERTIORARI TO THE UNITED STATES Court oF APPEALS For THE FirrH CrrcuIt PETITION FOR CERTIORARI FILED JULY 26, 1974 CERTIORARI GRANTED DECEMBER 16, 1974 BE IED sscnisisnpdemnesnseteseinsnangeinananins ssccpnpiveatsabinddaniaied Complaint of Ivan Allen Company ............................-..4. Answer of United States of America .................000--0.--...... SITTIN cchbsccininiuidsteunechasdiienedscenimaesnisodilieel saeshineniies enamel Exhibit A, Corporate Income Tax Return of Ivan Allen Company for the Year Ended June 30, 1965 Exhibit B, Corporate Income Tax Return of Ivan Allen Company for the Year Ended June 30 ,1966 Balance Sheet of Ivan Allen Company As of June 30, RR nce ssinahanipeiitibacssdialadtidaidalaiatiansabasats Statement of Income of Ivan Allen Company for the Year Ended June 30, 1965 Balance Sheet of Ivan Allen Company As of June 30, ET schvnepbienanmeien ssabeclaessaaaienihenallaaiieedaasiad tadantdacesainameaaastiieaiinedic | Statement of Income of Ivan Allen Company for the Year Ended June 30, 1966 ................. siamesaaloenunnadensaléel Order of the United States District Court for the Northern District of Georgia Entered October 6, 1972 Judgment of the United States District Court for the Northern District of Georgia Entered May 3, 1973 .... Opinion of the United States Court of Appeals for the Fifth Circuit Dated May 3, 1974 Judgment of the United States Court of Appeals for the Fifth Circuit Entered May 3, 1974 . 09 84 112 115 118 121 124 128 131 137 DOCKET ENTRIES May 14, 1971 Complaint with Exhibits A, B, C, & D, filed. Summons issued and delivered to U.S. Marshal. May 17,1971 Marshal's return on ser. executed 5-17-71 as to U.S. Atty. & executed 5-17-71 via Cert. mail as to Atty. Gen., filed. July 15, 1971 ANSWER of def. with DEMAND for a jury trial, filed. Aug. 26,1971 Deft’s interrogs. to pltf., filed. Sep. 21, 1971 4 Month Notice sent to counsel. Oct. 13, 1971 Def.’s Response to 4 month notice (let- ter), filed. TO RMS Oct. 15, 1971 Pltf’s. Response to 4 month notice (let- ter) with 2 attachment, filed. To RMS. Nov. 12, 1971 Pitf's Answers to Defts. Interrogs., with attachments, filed. Dec. 23, 1971 Notice to counsel requesting PT order by 1-31-72. (per CAM) Feb. 3, 1972 Counsel advised PTO now due 3-1-72 (counsel advised ct. settlement possible). Feb. 11, 1972 Set for jury trial on cal. commencing 3-13-72. Counsel advised. Feb. 23, 1972 Ext. to 4-1-72 by CAM for submitting prop. PTO. Off cal. 3-13-72. Counsel advised. Mar. 14,1972 Request for production of documents un- der Rule 34, filed. Mar. 28, 1972 Consent Order extending time thru 4- 20-72 for a Consolidated Pre-Trial Order to be filed, filed. (Copy to counsel - 3/28/72) » — Apr. 19, 1972 Deft’s response to pltf’s request for pro- duction of documents, filed. Apr. 20,1972 Proposed Consolidated Pre-Trial Order, Rec'd. TO RMS Apr. 27, 1972 Deft’s certificate as to production, with documents, attached, filed. May 4, 1972 Pitf’s motion for Order compelling dis- covery under Rule 37 with attachment, filed. To CAM. Pltf's memo of points & Authorities in support of mo- tion, filed. To CAM. May 18, 1872 SUBMITTED ON PLTFS’ MOTION FOR ORDER COMPELLING DISCOVERY UNDER RULE 37. May 22,1972 Defts. opposition to pltfs’ motion for or- der compelling discovery under Rule 37 with memorandum of points & authorities & exhibits “A” thru “D”, filed. To CAM. May 24, 1972 Set for jury trial on cal. commencing 6-19-72 at 10 am. Notice to counsel. June 8, 1972 ORDER on motion to compell discovery that Ct. having been informed the prtys. have entered into a stipulation . .. which may render moot plf.’s motion . . . ruling deferred pending action by the Ct. on said stipula- tion, filed. (c. counsel) June 12,1972 Stipulation with Exhibits A & B, filed. SUBMITTED PURSUANT TO ORDER OF JUNE 8, 1972 and STIPULATION FILED THIS DAY. June 14,1972 Case removed from trial cal. for 6-19-72; Counsel to file briefs as follows: Pltf’s. — due 7-12-72, Deft’s. reply - due 8-1-72 and P .f's rebuttal - due 8-11-72. FILE RETURNED - RESUBMIT AFTER 8/11/72. (see note in file) 3 July 12,1972 Brief on behalf of taxpayer, Ivan Allen Co., with Exh. A & B, filed. July 31, 1972 Trial brief for the deft., filed. Aug. 11, 1972 Reply brief on behalf of taxpayer Ivan Allen Company, filed. Aug. 15, 1972 RESUBMITTED PURSUANT TO EN- TRY OF JUNE 8, 1972 AND STIPULATION FILED 6/12/72. Oct. 6, 1972 ORDER filed directing the Government to refund all accumulated earnings taxes, including interest thereon, collected for the taxpayer’s fiscal years ending June 30, 1965 and June 30, 1966. Copy to counsel. Oct. 18,1972 Stipulation, filed. To CAM for approval. Oct. 26, 1972 ORDER approving above stipulation & dismissing issue (Par. 1), deft. has refunded to pltf. the interest in question, filed. Copy to counsel. Dec. 18,1972 set for non-jury trial 1-8-73, counsel noti- fied. Feb. 9, 1973 set for non-jury trial 2-12-73, counsel noti- fied. May 3, 1973 Stipulation, with approval of Court that the “salary issues” involved be dismissed with prejudice, each party to bear its own costs with respect thereto, filed. Copies furnished. JUDGMENT filed & entered that the pltf. recover from the deft. the sum of $150,515.85 in accumulated earnings tax paid to the deft. for the taxable years ended June 30, 1965, and June 30, 1966, plus int. thereon as provided by law & that the pltf. recover its taxable costs from the deft. to the extent such costs are attributable to the issue relating to the accumulated earnings tax involved. Copies furn. 4 June 28,1973 Defendant's Notice of Appeal, filed. (c. counsel & USCA w.d.s.) August 2, 1973 RECORD MAILED ON APPEAL TO USCA. (ACK lof2) May 29, 1974 Certified Copy of Judgment from USCA REVERSING AND REMANDING The judgment of the U.S. District Court for the additional factual determination of whether one purpose for the accumulation was to avoid income tax on behalf of shareholders in accordance with the opinion of USCA & directing that pltf-appellee pay to the deft-appellant the costs on appeal to be taxed by USCA, with copy of Bill of costs in the amount of $199.20, with opinion rec’d. (TO CAM) (w/file) June 11,1974 ORDER making mandate the judgment of the U.S. District Court, filed. Mandate, filed. Bill of costs taxed in U.S.C.A. against pltf. in sum of 199.20, filed. Notice to all counsel in compliance with Local Rule 141.4. Oct. 8, 1974 Notice to counsel requesting consolidated proposed PTO by 11-1-74. Oct. 15, 1974 Notice to counsel setting for non-jury trial 11-4-74. Oct. 23, 1974 ORDER removing this action from 11/4/74, trial calendar and CONTINUING same pending the decision of the Supreme Court on pltf’s petition for writ of certiorari; and counsel for pltf shall notify court upon receipt of notice of the Supreme Court’s ruling, filed. (Copy counsel 10/25/74) 5 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION CIVIL ACTION Ni. 15130 IVAN ALLEN COMPANY, Piaintiff, vs. UNITED STATES OF AMERICA, Defendant. COMPLAINT (Filed May 11, 1971) COMES NOW IVAN ALLEN COMPANY, plaintiff, and brings this action against the UNITED STATES OF AMERICA, defendant, and respectfully shows: 1. Jurisdiction of this Honorable Court is invoked under 28 U.S.C. §1346(a) (1). This action is a civil action against the United States of America, for the recovery of internal revenue taxes erroneously and illegally assessed against and collected from the said Ivan Allen Company for its two taxable years beginning July 1, 1964 and ending June 30, 1965 and beginning July 1, 1965 and ending June 30, 1966. 2. The plaintiff, Ivan Allen Company (hereinafter re- ferred to as “Taxpayer’”), is a corporation organized and existing under the laws of the State of Georgia, with its principal office and place of business in Atlanta, Fulton County, Georgia, within the Atlanta Division of the North- ern District of Georgia. 3. Taxpayer’s claim is for the recovery of $18,752.27 in principal amount of income taxes and $150,515.85 in prin- cipal amount of accumulated earnings taxes with the in- terest assessed thereon, all of which were erroneously and illegally assessed against and collected from Taxpayer by the Secretary of the Treasury or his delegate for the tax- able years of Taxpayer ended June 30, 1965 and June 30, 1966, respectively. 4. In each of the taxable years in question, Taxpayer kept its books and prepared its Federal income tax re- turns on the accrual basis of accounting. Taxpayer filed its return for each of the said taxable years and paid the tax shown as due thereon to the District Director of In- ternal Revenue Atlanta, Georgia. 5. Upon audit of Taxpayer’s returns for the taxable years in question, the Secretary of the Treasury or his delegate determined, but Taxpayer denies, that the sal- aries which Taxpayer paid Mr. Ivan Allen, Sr. and Mr. Ivan Allen, Jr. constituted unreasonable compensation and could not therefore be deducted as ordinary and neces- sary business expenses under Int. Rev. Code §162(a). The said Secretary or his delegate further determined, but Taxpayer denies, that Taxpayer had permitted its earnings and profits to accumulate beyond the reasonable needs of its business and that Taxpayer had been formed or availed of for the purpose of avoiding the income tax with respect to its shareholders by permitting its earnings and profits to accumulate instead of being divided or distributed within the meaning of Int. Rev. Code $532. 6. As a result of the determinations set out in Paragraph 5 above, the Secretary of the Treasury or his delegate as- sessed additional income and accumulated earnings taxes against Taxpayer in the aggregate amount of $87,743.32 for the taxable year 1965 and in the aggregate amount of $81,520 80. for the taxable year 1966. Interest on said ad- ditional income and aecumulated earnings taxes was also assessed against Taxpayer by the said Secretary or his delegate in the aggregate amount of $24,755.63 for the taxable year 1965 and in the aggregate amount of $18,108.78 for the taxable year 1966. 7. Taxpayer paid said additional income and accumulated earnings taxes to the Director of the Internal Revenue Service Center, Chamblee, Georgia on or about June l, 1970 and paid the interest on said additional income and accumulated earnings taxes to the said Director on or about November 20, 1970. . . On or about October 19, 1970, within the time provided by law, Taxpayer duly filed Claims for Refund of the said amounts of additional income and accumulated earn- ings taxes assessed against and collected from Taxpayer. On or about January 4, 1971, within the time provided by law, Taxpayer duly filed an amendment to the said Claims for Refund to include a claim for the refund of the interest assessed against and collected from Taxpayer on said amounts of additional income and accumulated earnings taxes. No decision has been rendered on the said Claims for Refund, as amended, by the Secretary of the Treasury or his delegate, and more than six months 8 prior to the filing of this suit have expired from the date on which the said Claims for Refund were filed. 9. Copies of the said Claims for Refund for the taxable years in question and the amendments thereto are attached hereto, made a part hereof, and marked Exhibits A through D, respectively. Taxpayer incorporates herein each and every allegation of fact and each and every contention set out in the said Claims for Refund and amendments thereto. 10. For the reasons stated in Taxpayer’s Claims for Re- fund, said additional income and accumulated earnings taxes and the interest thereon were erroneously and il- legally assessed against and collected from Taxpayer by the Secretary of the Treasury or his delegate. 11. No part of the aforesaid $18,752.27 of additional in- come taxes nor any part of the aforesaid $150,515.85 of accumulated earnings taxes nor any part of the interest thereon erroneously and illegally assessed against and col- lected from Taxpayer by the Secretary of the Treasury or his delegate for the taxable years in question has been refunded to Taxpayer. 12. By virtue of the aforesaid, the defendant United States of America became and now is indebted to Taxpayer in the full amount of $212,132.53 with interest thereon as provided by law. 13. Taxpayer seeks refund herein of said additional in- come and accumulated earnings taxes and the interest thereon erroneously and illegally assessed against and col- lected from Taxpayer, with interest thereon from the dates of payment as provided by law, or such greater amount as may be legally refundable. 14. Taxpayer has complied with all conditions precedent to the bringing of this suit. WHEREFORE, Taxpayer prays that judgment be en- tered in its favor in the amount of $212,132.53 with interest thereon as provided by law, or in such greater amount as may be legally refundable, that the Court grant such other relief as it may deem proper, and that Taxpayer be awarded its costs. King & Spalding /s/ Kirk A. McAlpin /s/ Stanley W. Rosenkranz /s/ Herschel M. Bloom Attorneys for the Plaintiff Ivan Allen Company 2500 Trust Company of Georgia Building Atlanta, Georgia 30303 404/577-5350 11 Exhibit A a: el . eS Oe wee Ones + rertrcrr Tr ietyT ts — oO by pron leon - ef . . ' ws i ~~ Ce { ee Li . N rome Tu PUA WITH THE Ds TICE DEE CTOr WHER s . ASSLSSMERS ov WAS » MADE OR TAY PAID The Datutlivet Leeda fon the block bel. the bend of chrom file d onl itl an, where requeed { a} Refund of Tones le golly, Crroncously, of Cacessively Collected, [] Refund of Amount f vid for Stomps Unused, or Used in Error or Excess. a Abatement of Tax Assessed (not applicoble to cstote, gift, or income taxes). PLL/ SE TYPE OR PPINT PLAINLY Nome of toapuyer of porchoser of stomos _ivan Allen Comp. ny Number ood street 1 City, tuwn, Stote, Postal dP Code P.O. Rox 1712 i Atlanta, Georgia 30391 qumintintes A — — ——- = Filli ine pplice she itens —/. Mach letter size sheet: spose is net su.deient @ Your socc’ pesurity numdSer | Waite snom ber, if jornt return tr Vf on emp loys, enter “employer Jentifieahon number 7 Se Pe Le a a ee SS lll a €. District in which retuen (pf ony) wos filed d Nome and oddress show: on return, if different from ebo-e is ir. Ga. Dis. Dir. G same Pa avon e. Period —if for tos reported on onns at 2515, propore seporate form for each toxable qj Kud of tox from July 1 ee ae 19 64. To June_ 30 65 | Income a @. Amount of os: «ners }Dotes of poymenr $855.00: 10/1 5/64 4; $885.00: 12/15/04; _ $252, 127. 62 $)2,125.09:4/15/65; $22. 125.00:6/15/6%5; $60,000:°9/2/65 =| Dute stamps were pu vichese 4 ) Gam a i, Av oun be « funded (It ineowe tou, $ +h ‘18 . 95 21 ‘4/17/65 ; Government complete competetion below) $91 3 88 ‘ 67 :6/1/70 887.7 t.58 $ — 4 —-— ——— -_—---_ b The « ont bel eves thot Ps « 7 _ shovid Le llc. ed for the folinw ng rectors See Attached Statement coNn.: UTATIC’! OF INCOME TAX REFUND Income Tox qnesnee-eaen — asesen ee — 8 Tox withhold — ‘ ‘ . ‘ =" ‘ ne@oee . a 2. Estrroted tox paid : ‘Ks er rey hel. 4 eee 4 020, _— 3. Tox paid with original return é hg ; 7 eames Fe o.oo ll’ Pe). Oe 4 ) 4. Any odditional income tax poid “ae Pie fee FO SAD, SB Aa: 91; ~s 788. 67 5. Total tox poid (Add lines 1-4) wd haere ae a 52, 1 27. 62 6. Less: Your computaticn of correct tox 164, 380. 30 7. Amovnt of overpoy'r: ¢ ‘ is Serer eee. 87,747.32* 8. Amount previously rc! cd a -0- 9. Net overpoyment (Enter in ten i chove) 87, 147.32 Under penaltus of perjury, declare ! thes claum, wnciucing ony occompanying sch duics ond statements, has been ¢ nemined by me “nd to the bust of my Knowledge end belief it is true end correct NI icankac dy inbanbiolen pecceuisonaesesesueiaens sbaeeeeecsieses sasécensoawe , SEC INSTRUC: 1ONS ou " paveRse FORT, 883 ( ov. 7-65) *O: such gre ster amount as may be leaqally refw itble. 12 STATEMENT ATTACHED TO AND FORMING A PART OF THE CLAIM OF IVAN ALLEN COMPANY FOR REFUND OF INCOME AND ACCUMULATED EARN- INGS TAXES PAID FOR THE TAXABLE YEAR 1965 I. Salary Paid by Taxpayer to Ivan Allen, Sr. A. Statement of Facts During the taxable year in question and during all the years of its existence, Ivan Allen Company (hereinafter referred to as “Taxpayer’’), was engaged in the office supply business. Taxpayer was founded in 1899 by Mr. Ivan Allen, Sr. and Mr. J. W. Fielder. At that time, the office supply business was unique, and Ivan Allen, Sr. may well have been its originator. He was undoubtedly the first in the southeast to visualize the idea of a department store of office equipment. The business prospered in the early 1900’s. and in 1920, Mr. Allen, Sr. was elected President of Taxpayer. In 1938 he became Chairman of Taxpayer’s Board of Di- rectors and served in this position until his death. During a substantial portion of the period in which he served Taxpayer as President and Chairman of its Board of Directors, Mr. Allen, Sr. had the primary respon- sibility for the management and supervision of Taxpayer’s business and was undoubtedly the major factor in its suc- cess and growth. Moreover, Mr. Allen, Sr. was responsi- ble for a number of innovations in the office supply busi- ness, all of which contributed to Taxpayer’s success. He originated an inventory control plan, which for years has been the most widely used plan in the business. With minor improvements, both the standard accounting forms and cost of doing business forms which Mr. Allen, Sr. 13 developed are still being used. He developed the quintup- let charge and billing system whereby the invoice, charge, delivery ticket, statistical record and salesman’s slip are all made in one operation. Finally, Mr. Allen, Sr. was the first to capitalize on the use of “visual education” in the business. Indeed, as early as 1923, he suggested using films to demonstrate the various manufacturing pro- cesses and facilities connected with the stationer’s industry. Mr. Allen, Sr. was not only a successful business- man but also took an active part in numerous civic activi- ties. He served as President of the Atlanta Chamber of Commerce, as President of the Southeastern Fair Associa- tion and was the first President of the Atlanta Convention Bureau. He served as a member of a small committee which raised the first substantial funds for the Atlanta area Boy Scouts and for many years served on the Execu- tive Committee of the Council of Boy Scouts. Mr. Allen, Sr. was one of the original members of the Agriculture and Industrial Development Board of Georgia. He served as Chairman of the Forward Atlanta Commission, of the Fulton County Department of Public Welfare, and of a Committee which raised funds to reestablish Oglethorpe University. Finally, Mr. Allen, Sr.’s close relationship with President Franklin D. Roosevelt led to his appointment as Chairman of the Federal Home Loan Bank in the south- east and as Chairman of the Franklin D. Roosevelt Warm Springs Memorial Commission. Thus, while Mr. Allen, Sr. was implementing the many innovations in the office supply business which he had developed, he was also engaged in various civic activities which drew attention to and created respect for both Tax- payer and Mr. Allen, Sr. It was this combination of Mr. Allen, Sr.’s business acumen and his various civic activities which led to Taxpayer’s growth into a highly successful company. 14 Notwithstanding Mr. Allen, Sr.’s role in Taxpayer’s success, his salary was always extremely modest. Indeed, throughout his years of service to Taxpayer, Mr. Allen, Sr. was paid a salary which was always less than Tax- payer’s leading salesman, and frequently less than sever2] of Taxpayer’s salesmen. In 1964, Mr. Allen, Sr. suffered a stroke which cur- tailed his activities with Taxpayer. At that time, he had served Taxpayer for more than 64 years, always at a very modest salary. Even after his sickness, however, Mr. Allen, Sr. continued to serve Taxpayer in a consulting capacity. In consideration of his services as a consultant and for the many years of service in which he was the major factor in Taxpayer’s development, Taxpayer con- tinued to pay him the very modest annual salary of $12,525.16. Taxpayer deducted the amount of the salary which it paid to Mr. Allen, Sr. as an ordinary and necessary business expense for its taxable year 1965. The Commis- sioner determined, however, that the amount paid to Mr. Allen, Sr. constituted unreasonable compensation and that the payment should not therefore have been deducted. Accordingly, the Commissioner assessed a deficiency against Taxpayer for its taxable year 1965. Taxpayer has paid the deficiency. This claim is filed for the refund of the deficiency so paid, with interest thereon as provided by law, or such greater amount as may be legally refundable. B. Taxpayer’s Contentions (1) The amount which Taxpayer paid to Mr. Ivan Allen, Sr. constituted a reasonable salary for both past and present personal services actually rendered to Tax- payer within the meaning of Int. Rev. Code §162(a) (1). 15 The amount which Taxpayer paid to Mr. Allen, Sr. was, therefore, an ordinary and necessary business expense within the meaning of Int. Rev. Code §162(a). (2) Under the contention stated above, the amount which Taxpayer paid to Mr. Allen, Sr. was properly de- ducted by Taxpayer under Int. Rev. Code §162(a). Accord- ingly, the deficiency assessed against and paid by Taxpayer constitutes an overpayment for which Taxpayer is entitled to a refund. II. Salary Paid by Taxpayer to Ivan Allen, Jr. A. Statement of Facts Ivan Allen, Jr. was employed by Taxpayer in 1933. In 1938 he became Secretary-Treasurer of Taxpayer. In 1946 he was elected President of Taxpayer and in 1957 became Vice Chairman of Taxpayer’s Board of Directors. In 1962, Mr. Allen, Jr. was elected Mayor of the City of Atlanta and served in this capacity during the taxable year in question. Although his duties as Mayor limited the time which Mr. Allen, Jr. was able to spend on Tax- payer’s routine matters, he continued to serve as Tax- payer’s chief policy maker. For example, Mr. Allen, Jr. continued to receive daily communications with respect to the business problems confronting Taxpayer and often made daily responses. He continued to review all internal financial reports, including inventory and sales data, and was in frequent consultation with Taxpayer’s officers with respect to merchandising lines, sales, personnel matters, inventory, accounting, and market extension. Mr. Allen, Jr. continued to determine both Taxpayer’s sales policies and the character of its advertising and promotiozal opera- tions. He also continued his primary decision making role with respect to Taxpayer’s major expenditures, including 16 not only capital expenditures but also contributions to the Ivan Allen Company Foundation and to Taxpayer's profit sharing plan. In short, Taxpayer made no policy decision of any significance during the taxable year in question without first obtaining the advice and approval of Mr. Allen, Jr. Even prior to becoming Mayor of Atlanta, Mr. Allen, Jr., like his father, contributed to Taxpayer’s success by spending at least one-half of his working time engaged in civic and outside business activities. Nevertheless, Tax- payer’s success during these years clearly attest to Mr. Allen, Jr.’s ability to operate Taxpayer while spending a substantial portion of his time engaged in activities other than the management and supervision of Taxpayer's af- fairs. In 1948, Taxpayer paid Mr. Allen, Jr. a very modest salary of $12,000. As his responsibility and value to Tax- payer grew, Mr. Allen, Jr.’s salary was increased to $30,000. When Mr. Allen, Jr. became Mayor of Atlanta, however, Taxpayer recognized that the amount of time that he could spend on its affairs would be curtailed. Accordingly, be- ginning in 1962 and including the taxable year in question, Taxpayer reduced Mr. Allen’s salary to $15,025.08. During the taxable year 1965, Taxpayer paid its presi- dent, Mr. W. H. Glenn, a salary of $31,000, approximately double that of Mr. Allen, Jr. In the same year, nine of Taxpayer's salesmen received salaries greater than that of Mr. Allen, Jr. Taxpayer deducted the amount of the salary which it paid to Mr. Allen, Jr. as an ordinary and necessary business expense for its taxable year 1965. The Commis- sioner determined, however, that the amount paid to Mr. Allen, Jr. constituted unreasonable compensation and that 17 the payment was not therefore deductible. Accordingly, the Commissioner assessed a deficiency against Taxpayer for its taxable year 1965. Taxpayer has paid the deficiency. This claim is filed for the refund of the deficiency so paid, with interest thereon as provided by law, or such greater amount as may be legally refundable. B. Taxpayer’s Contentions (1) The amount which Taxpayer paid to Mr. Allen, Jr. constituted a reasonable salary for personal services actually rendered to Taxpayer within the meaning of Int. Rev. Code §162(a)(1). The amount which Taxpayer paid to Mr. Allen, Jr. was, therefore, an ordinary and necessary business expense within the meaning of Int. Rev. Code §162(a). (2) Under the contention stated above, the amount which Taxpayer paid to Mr. Allen, Jr. was properly de- ducted by Taxpayer under Int. Rev. Code §162(a). Ac- cordingly, the deficiency assessed against and paid by Tax- payer constitutes an overpayment for which Taxpayer is entitled to a refund. III. Accumulated Earnings Tax A. Statement of Facts Taxpayer’s shareholders as of June 30, 1965 were as follows: No. of Shares Allen, Beaumont 925 Allen, Hugh Inman 2615 Allen, Irene Beaumont 2265 Allen, Ivan Sr. 5650 Allen, Ivan Jr. 4580 18 Allen, Ivan Jr. Trustee U/W Charles M. Marshall Allen, Ivan III Allen, Ivan IV Allen, Louise R. Allen, Margaret Poer Ball, Jack T. Brumbelow, Morris Carnes, John Dickerson, Elmer Estes, Robert S. Floyd, W. F. Jr. Glenn, W. H. Hampton, James F. Harris, Andrew D. Harris, Grady W. Harris, W. D. Jones, Hayden C. Jr. Lanier, D. B. Layton, Estate of Charles R. Murphy, J. H. Ownby, O. G. Ownby, O. G. Trustee for Roger Paul Ownby, O. G. Trustee for Scott Alan Patrick, James H. Pettes, Thompson P. Richardson, Walter Snellings, Walter Arnold Tebow, D. L. Williams, J. C. Wilson, S. W. Winslow, T. E. Total 19 As m operating company, Taxpayer has a readily ascertainable operating cycle and a need for sufficient working capital to operate its business through at least one such cycle. Since Taxpayer’s net liquid assets deter- mined as of the end of the taxable year in question which were available for use in meeting its working capital re- quirements were less than its needs, Taxpayer retained a portion of its earnings and profits for the taxable year. For a number of years, including the taxable year in question, Taxpayer has held certain marketable secu- rities. Substantially all of these securities, however, were of corporations engaged in businesses related to that of Taxpayer. Moreover, since most of the securities had greatly appreciated in value, Taxpayer would have had to incur a substantial capital gains tax to convert them into cash. For these reasons, Taxpayer’s management viewed the securities as business investments which were not available either for use in meeting Taxpayer’s reason- able business needs or for distribution to its shareholders. However, even if the cost of Taxpayer’s marketable secu- rities are included in the computation of Taxpayer’s net liquid assets, the cost of one of Taxpayer's operating cycles for the taxable year in question was still in excess of its net liquid assets determined as of the end of the taxable year. Taxpayer does not have a history of making loans to its shareholders and possesses a record of regular and substantial dividends. Moreover, the income tax conse- quences to Taxpayer’s shareholders have never been con- sidered in determining its dividend policy. Taxpayer's ratio of current assets to current liabilities for the taxable year in question was extremely small. Indeed, only a very insignificant amount of Taxpayer's 20 earnings and profits has ever been invested in assets other than assets directly related to the operation of Taxpayer’s business. Nevertheless, the Commissioner determined that Tax- payer had accumulated earnings beyond the reasonable needs of its business and that this accumulation was for the purpose of avoiding the income tax with respect to its shareholders. Accordingly, the Commissioner assessed an accumulated earnings tax deficiency against Taxpayer for its taxable year 1965. Taxpayer has paid the deficiency. This claim is filed for the refund of the deficiency with interest thereon as provided by law, or such greater amount as may be legally refundable. B. Taxpayer's Contentions (1) The marketable securities which Taxpayer held and which had substantially appreciated in value were not available either for use in meeting Taxpayer’s reason- able business needs or for distribution to its shareholders. For this reason, the marketable securities are excludable in computing Taxpayer’s net liquid assets available for use in its business. The cost of one of Taxpayer’s operat- ing cycles for the taxable year in question thus exceeded its net liquid assets available for use in its business deter- mined as of the end of the taxable year. Consequently, Taxpayer’s earnings and profits for the taxable year in question which it retained were not in excess of and were retained by Taxpayer for the reasonable needs of its busi- ness, including the reasonably anticipated needs of its busi- ness, within the meaning of Int. Rev. Code §535(c). Ac- cordingly, in computing its accumulated taxable income under Int. Rev. Code §535, Taxpayer is entitled to an accumulated earnings credit in an amount at least equal 21 to the amount of its retained earnings and profits for the taxable year in question (or in such lesser amount of its earning and profits for the taxable year in question as may be determined to have been retained by Taxpayer for the reasonable needs of its business, including the reasonably anticipated needs of its business. ) (2) Even if the marketable securities held by Tax- payer are includable in computing Taxpayer’s net liquid assets available for use in its business, which Taxpayer denies, the cost of one of Taxpayer’s operating cycles for the taxable year in question still exceeded its net liquid assets determined as of the end of the taxable year. Con- sequently, Taxpayer’s earnings and profits for the taxable year in question which it retained were not, in excess of and were retained by Taxpayer for the reasonable needs of its business, including the reasonably anticipated needs of its business, within the meaning of Int. Rev. Code §535(c). Accordingly, in computing its accumulated tax- able income under Int. Rev. Code 8535, Taxpayer is entitled to an accumulated earnings credit in an amount at least equal to the amount of its retained earning and profits for the taxable year in question (or in such lesser amount of its earnings and profits for the taxable year in ques- tion as may be determined to have been retained by Tax- payer for the reasonable needs of its business, including the reasonably anticipated needs of its business. ) (3) Even if the earnings and profits which Taxpayer retained exceeded the reasonable needs of its business, including the reasonably anticipated needs of its business, which Taxpayer denies, such excess was not accumulated by Taxpayer for the purpose of avoiding the income tax with respect to its shareholders. Taxpayer was not, there- fore, formed or availed of for the purpose of avoiding the income tax with respect to its shareholders or the 22 shareholders of any other corporation by permitting its earnings and profits to accumulate instead of being divided and distributed within the meaning of Int. Rev. Code §532 (a). (4) Under any of the alternative contentions stated above, Taxpayer is not subject to an accumulated earnings tax liability under Int. Rev. Code §531 for the taxable year in question. Accordingly, the accumulated earnings tax deficiency assessed against and paid by Taxpayer con- stitutes an overpayment for which Taxpayer is entitled to a refund. 23 Exhibit B -_- -- - . — — ——_—_— —— TT me 6 emma — we es = 3 Director's toms form q's = (Dote reremwo ot (Rev Wow 1) . . “vr . Oorete of the eery AMENDED C: rata | FOR nol UND internal be.emue Of ne —_—— —-- -_——— eo _ a ee the In ermal Mevenue Serwce will inchoate om the block below the tind ef claim tiled, and till in, where required. (C) Refund of Taacs Miecally, Crroneously, or Lace:.sively Collected. 0 Refund of Amount Paid for Stamps Unused, or Used in Crror or Cxcess. oO Abatement of Tax Assessed (not applicable to income, estate or gift taxes). Please Type © or Print Plainly Name oft taxpoyer or ‘purchaser of stomps _IVAN Al... EN_COMPANY os Number and | strect : City of town, State, and 7'P code P. O. Box 1712 ' Atlanta, Gocorgia 3030) Fill in applicable | iteMS—Use attachments if necessary Wife's "s number, f jount return | b. Employer identification number (it any) 2. Your social security number : : 58-0136820 ¢. Name and address shown on return, if different from above ¢. Internal Revenue Service office where re- turn (it any) was filed Dist. Dir. Georgia same e. Periog—it for tax reported On annual basis, prepare separate form for each taxable "E5 f. Kind of tax from vuly il, Mh June 30, Income seems fageper TRS ehO AN SO TECEET Dob go h. h. Date stamps were purchased from Govern. | i Amount to b. refunded -y mcome tax, ment complete computation below) $_87,747.32* k. The claimant believes that this cicim should be ailo. 4 for the following reasons: BEST COPY AVAILABLE See Attached Statement COMPUTATION OF INCOME TAX REFUND Income Tax f... s Se ee ee ee es ee ee ee ee ee ee ee ee ee ee ee SGamemestpems. « «see eeueveeevnenseeveeeeene eee © oF 46, 020. 00. 3 Tax paid with original return . o he 114,318, BT 4 Any a =tional income tax paid . “oe a a a oe oe oe ee ee ee ee ee ae oe 91 2788.67 “fe penn net a = 8 s s 81 ’ 520.80_ i $ a b he ve le ves thet us ¢) 4 shouts be ‘ol owed for the follow ing fOsONS: See Attached Stztement CO. AtUN OF INCOME TAX RCSUND Income Tox V. Tou withhe’d 0... oc... ENIAC EA RAO EDD rE A AAR SS a er re rT eee ee eee eee Cee ee a 34 ge -90_ —w se UE Wes CUI GID goon cc cos eee hee Oe Ree U ONES EDS SES ORES RODEO DEH OED EDs - 300, 204 95 aia G. Asm Oteiigrl trmpene Gan POND gw nc cc ccc ccc cece reer esessvcssesereseesenesssess "99,616.14. i es BO, goa none kncdcnsccdocncencessts ics ccm dull ay ade wae 328,621..09..... 6. Less: Your computation of correct 10K... ee eee eee eee eww eee eee eeee | 244, 100-29 eee rr Tr rrr Tre eee ee ee Te Tee eee rT Te ee eee 81,.520.C° * 8. Amount previor by SO eee re ee See eee eT ee ee ee eC) os -0- —- GS. Net overpoyee # (Fever interes § above) Peer ee eee TT ee PT eC eC LU oe Sf 0+ + sBneseees 81, 520. BO oseee der pe multe: of perjury, | doclore that this claim, including ary accen-panying schedules ond statements, has been cxomined by me ond to the ' «tof my knowledge ond belef it is true ond correct. BIG ons cnce: tewes seddincnennsececsssscang: Wes SCL WaSIFUCTICNS OF FEVERSE fORM 843 (ev. 7-65) 7Or such greater airmcunt as may be legally refundabic. ee ee ee ee ——— ee ee ee — eee eee ee ee - -—- 32 STATEMENT ATTACHED TO AND FORMING A PART OF THE CLAIM OF IVAN ALLEN COMPANY FOR RE- FUND OF INCOME AND ACCUMULATED EARNINGS TAXES PAID FOR THE TAXABLE YEAR 1966 I. Salary Paid by Taxpayer to Ivan Allen, Sr. A. Statement of Facts During the taxable year in question and during all the years of its existence, Ivan Allen Company (herein- after referred to as “Taxpayer”), was engaged in the office supply business. Taxpayer was founded in 1899 by Mr. Ivan Allen, Sr. and Mr. J. W. Fielder. At that time, the office supply business was unique, and Ivan Allen, Sr. may well have been its originator. He was undoubtedly the first in the southeast to visualize the idea of a department store of office equipment. The business prospered in the early 1900’s, and in 1920, Mr. Allen, Sr. was elected President of Taxpayer. In 1938 he became Chairman of Taxpayer’s Board of Di- rectors and served in this position until his death. During a substantial portion of the period in which he served Taxpayer as President and Chairman of its Board of Directors, Mr. Allen, Sr. had the primary responsi- bility for the management and supervision of Taxpayer’s business and was undoubtedly the major factor in its suc- cess and growth. Moreover, Mr. Allen, Sr. was responsi- ble for a number of innovations in the office supply busi- ness, all of which contributed to Taxpayer’s success. He originated an inventory control plan, which for years has been the most widely used plan in the business. With minor improvements, both the standard accounting forms and cost of doing business forms which Mr. Allen, Sr. 33 developed are still being used. He developed the quintup- let charge and billing system whereby the invoice, charge, delivery ticket, statistical record and salesman’s slip are all made in one operation. Finally, Mr. Allen, Sr. was the first to capitalize on the use of “visual education” in the business. Indeed, as early as 1923, he suggested using films to demonstrate the various manufacturing pro- cesses and facilities connected with the stationer’s industry. Mr. Allen, Sr. was not only a successful businessman but also took an active part in numerous civic activities. He served as President of the Atlanta Chamber of Com- merce, as President of the Southeastern Fair Association and was the first President of the Atlanta Convention Bureau. He served as a member of a small committee which raised the first substantial funds for the Atlanta area Boy Scouts and for many years served on the Execu- tive Committee of the Council of Boy Scouts. Mr. Allen, Sr. was one of the original members of the Agriculture and Industrial Development Board of Georgia. He served as Chairman of the Forward Atlanta Commission, of the Fulton County Department of Public Welfare, and of a Committee which raised funds to reestablish Oglethorpe University. Finally, Mr. Allen, Sr.’s close relationship with President Franklin D. Roosevelt led to his appointment as Chairman of the Federal Home Loan Bank in the south- east and as Chairman of the Franklin D. Roosevelt Warm Springs Memorial Commission. Thus, while Mr. Allen, Sr. was implementing the many innovations in the office supply business which he had developed, he was also engaged in various civic activities which drew attention to and created respect for both Tax- payer and Mr. Allen, Sr. It was this combination of Mr. Allen, Sr.’s business acumen and his various civic activities which led to Taxpayer’s growth into a highly successful company. 34 Notwithstanding Mr. Allen, Sr.’s role in Taxpayer’s success, his salary was always extremely modest. Indeed, throughout his years of service to Taxpayer, Mr. Allen, Sr. was paid a salary which was always less than Taxpay- er’s leading salesman, and frequently less than several of Taxpayer’s salesmen. In 1964, Mr. Allen, Sr. suffered a stroke which cur- tailed his activities with Taxpayer. At that time, he had served Taxpayer for more than 64 years, always at a very modest salary. Even after his sickness, however, Mr. Allen, Sr. continued to serve Taxpayer in a consulting capacity. In consideration of his services as a consultant and for the many years of service in which he was the major factor in Taxpayer’s development, Taxpayer con- tinued to pay him the very modest annual salary of $12,525.16. Taxpayer deducted the amount of the salary which it paid to Mr. Allen, Sr. as an ordinary and necessary business expense for its taxable year 1966. The Commis- sioner determined, however, that the amount paid to Mr. Allen, Sr. constituted unreasonable compensation and that the payment should not therefore have been deducted. Accordingly, the Commissioner assessed a deficiency against Taxpayer for its taxable year 1966. Taxpayer has paid the deficiency. This claim is filed for the refund of the deficiency so paid, with interest thereon as provided by law, or, such greater amount as may be legally refundable. B. Taxpayer’s Contentions (1) The amount which Taxpayer paid to Mr. Ivan Allen, Sr. constituted a reasonable salary for both past and present personal services actually rendered to Tax- payer within the meaning of Int. Rev. Code §162(a) (1). 35 The amount. which Taxpayer paid to Mr. Allen, Sr. was, therefore, an ordinary and necessary business expense within the meaning of Int. Rev. Code §162(a). (2) Under the contention stated above, the amount which Taxpayer paid to Mr. Allen, Sr. was properly de- ducted by Taxpayer under Int. Rev. Code §162(a). Ac- cordingly, the deficiency assessed against and paid by Tax- payer constitutes an overpayment for which Taxpayer is entitled to a refund. II. Salary Paid by Taxpayer to Ivan Allen, Jr. A. Statement of Facts Ivan Allen, Jr. was employed by Taxpayer in 1933. In 1938 he became Secretary-Treasurer of Taxpayer. In 1946 he was elected President of Taxpayer and in 1957 became Vice Chairman of Taxpayer’s Board of Directors. In 1962, Mr. Allen, Jr. was elected Mayor of the City of Atlanta and served in this capacity during the taxable year in question. Although his duties as Mayor limited the time which Mr. Allen, Jr. was able to spend on Tax- payer’s routine matters, he continued to serve as Tax- payer’s chief policy maker. For example, Mr. Allen, Jr. continued to receive daily communications with respect to the business problems confronting Taxpayer and often made daily responses. He continued to review all it.ternal financial reports, including inventory and sales data, and was in frequent consultation with Taxpayer’s officers with respect to merchandising lines, sales, personnel matters, inventory, accounting, and market extension. Mr. Allen, Jr. continued to determine both Taxpayer’s sales policies and the character of its advertising and promotional oper ations. He also continued his primary decision making role with respect to Taxpayer’s major expenditures, includ- ing not only capital expenditures but also contributions 36 to the Ivan Allen Company Foundation and to Taxpayer's profit sharing plan. In short, Taxpayer made no policy decision of any significance during the taxable year in question without first obtaining the advice and approval of Mr. Allen, Jr. Even prior to becoming Mayor of Atlanta, Mr. Alien, Jr., like his father, contributed to Taxpayer's success by spending at least one-half of his working time engaged in civic and outside business activities. Nevertheless, Tax- payer’s success during these years clearly attest to Mr. Allen, Jr.’s ability to operate Taxpayer while spending a substantial portion of his time engaged in activities other than the management and supervision of Taxpayer's af- fairs. In 1948, Taxpayer paid Mr. Allen, Jr. a very modest salary of $12,000. As his responsibility and value to Tax- payer grew, Mr. Allen, Jr.'s salary was increased to $30,000. When Mr. Allen, Jr. became Mayor of Atlanta, however, Taxpayer recognized that the amount of time that he could spend on its affairs would be curtailed. Accordingly, be- ginning in 1962 and including the taxable year in question, Taxpayer reduced Mr. Allen’s salary to $15,025.08. During the taxable year 1966, Taxpayer paid its pres- ident, Mr. W. H. Glenn, a salary of $34,000, approximately double that of Mr. Allen, Jr. In the same year, ten of Taxpayer’s salesmen received salaries greater than that of Mr. Allen, Jr. Taxpayer deducted the amount of the salary which it paid to Mr. Allen, Jr. as an ordinary and necessary business expense for its taxable year 1966. The Commis- sioner determined, however, that the amount paid to Mr. Allen, Jr. constitdted unreasonable compensation and that the payment was not therefore deductible. Accordingly, 37 the Commissioner assessed a deficiency against Taxpayer for its taxable year 1966. Taxpayer has paid the deficiency. This claim is filed for the refund of the deficiency so paid, with interest thereon as provided by law, or such greater amount as may be legally refundable. B. Taxpayer's Contentions (1) The amount which Taxpayer paid to Mr. Allen, Jr. constituted a reasonable salary for personal services actually rendered to Taxpayer within the meaning of Int. Rev. Code §162(a)(1). The amount which Taxpayer paid to Mr. Allen, Jr. was, therefore, an ordinary and necessary business expense within the meaning of Int. Rev. Code §162 (a). (2) Under the contention stated above, the amount which Taxpayer paid to Mr. Allen, Jr. was properly de- ducted by Taxpayer under Int. Rev. Code §162(a). Ac- cordingly, the deficiency assessed against and paid by Tax- payer constitutes an overpayment for which Taxpayer is entitled to a refund. III. Accumulated Earnings Tax A. Statement of Facts Taxpayer’s shareholders as of June 30, 1966 were as follows: No. of Shares Allen, Beaumont 1120 Allen, Hugh Inman 3019 Allen, Irene Beaumont 2615 Allen, Ivan Sr. 6525 Allen, Ivan Jr. 5158 38 Allen, Ivan Jr. Trustee U/W Charles M. Marshall 11145 Allen, Ivan III Allen, Ivan IV Allen, Louise R. Allen, Margaret Poer Ball, Jack T. Brumbelow, Morris Carnes, John Dickerson, Elmer Estes, Robert S. Floyd, W. F. Jr. Glenn, W. H. Hampton, James F. Harris, Andrew D. Harris, Grady W. Harris, W. D. Jones, Hayden C. Jr. Lanier, D. B. Layton, Estate of Charles R. Murphy, J. H. Ownby, O. G. Ownby, O. G. Trustee for Roger Paul Ownby, O. G. Trustee for Scott Alan Patrick, James H. Pettes, Thompson P. Richardson, Walter Snellings, Walter Arnold Tebow, D. L. Williams, J.C. Wilson, S. W. Winslow, T. E. Total 2731 179 2442 131 23 11 892 346 46 683 2772 28 bh 231 577 43506 39 As an operating company, Taxpayer has a readily ascertainable operating cycle and a need for sufficient working capital to operate its business through at least one such cycle. Since Taxpayer’s net liquid assets deter- mined as of the end of the taxable year in question which were available for use in meeting its working capital re- quirements were less than its needs, Taxpayer retained a portion of its earnings and profits for the taxable year. For a number of years, including the taxable year in question, Taxpayer has held certain marketable secu- rities. Substantially all of these securities, however, were of corporations engaged in businesses related to that of Taxpayer. Moreover, since most of the securities had greatly appreciated in value, Taxpayer would have had to incur a substantial capital gains tax to convert them into cash. For these reasons, Taxpayer’s management viewed the securities as business investments which were not available either for use in meeting Taxpayer’s reason- able business needs or for distribution to its shareholders. However, even if the cost of Taxpayer’s marketable secu- rities are included in the computation of Taxpayer’s net liquid assets, the cost of one of Taxpayer’s operating cycles for the taxable year in question was still in excess of its net liquid assets determined as of the end of the taxable year. Taxpayer does not have a history of making loans to its shareholders and possesses a record of regular and substantial dividends. Moreover, the income tax conse- quences to Taxpayer’s shareholders have never been con- sidered in determining its dividend policy. Taxpayer’s ratio of current assets to current liabilities for the taxable year in question was extremely small. Indeed, only a very insignificant amount of Taxpayer’s earnings and profits has ever been invested in assets other 40 than assets directly related to the operation of Taxpayer’s business. Nevertheless, the Commissioner determined that Tax- payer had accumulated earnings beyond the reasonable needs of its busiress and that this accumulation was for the purpose of avoiding the income tax with respect to its shareholders. Accordingly, the Commissioner as- sessed an accumulated earnings tax deficiency against Tax- payer for its taxable year 1966. Taxpayer has paid the deficiency. This claim is filed for the refund of the deficiency with interest thereon as provided by law, or such greater amount as may be legally refundable. B. Taxpayer’s Contentions (1) The marketable securities which Taxpayer held and which had substantially appreciated in value were not available either for use in meeting Taxpayer’s reason- able business needs or for distribution to its shareholders. For this reason, the marketable securities are excludable in computing Taxpayer’s net liquid assets available for use in its business. The cost of one of Taxpayer’s operat- ing cycles for the taxable year in question thus exceeded its net liquid assets available for use in its business de- termined as of the end of the taxable year. Consequently, Taxpayer’s earnings and profits for the taxable year in question which it retained were not in excess of and were retained by Taxpayer for the reasonable needs of its busi- ness, including the reasonably anticipated needs of its busi- ness, within the meaning of Int. Rev. Code §535(c). Ac- cordingly, in computing its accumulated taxable income under Int. Rev. Code §535, Taxpayer is entitled to an accumulated earnings credit in an amount at least equal to the amount of its retained earnings and profits for 41 the taxable year in question (or in such lesser amount of its earning and profits for the taxable year in question as may be determined to have been retained by Taxpayer for the reasonable needs of its business, including the reasonably anticipated needs of its business. ) (2) Even if the marketable securities held by Tax- payer are includable in computing Taxpayer's net liquid assets available for use in its business, which Taxpayer denies, the cost of one of Taxpayer’s operating cycles for the taxable year in question still exceeded its net liquid assets determined as of the end of the taxable year. More- over, if Taxpayer had distributed in its taxable year 1965 an amount equal to its accumulated taxable income for that year and had utilized its marketable securities to meet its working capital requirements, as the Commissioner contends it should have and Taxpayer denies, the cost of one of Taxpayer’s operating cycles would have exceeded its net liquid assets determined as of the end of the tax- able year in question by an even greater amount. Conse- quently, Taxpayer’s earnings and profits for the taxable year in question which it retained were not in excess of and were retained by Taxpayer for the reasonable needs of its business, including the reasonably anticipated needs of its business, within the meaning of Int. Rev. Code §535 (c). Accordingly, in computing its accumulated taxable income under Int. Rev. Code §535, Taxpayer is entitled to an accumulated earnings credit in an amount at least equal to the amount of its retained earning asd profits for the taxable year in question (or in such lesser amount of its earnings and profits for the taxable year in question as may be determined to have been retained by Taxpayer for the reasonable needs of its business, including the reasonably anticipated needs of its business.) 42 (3) Even if the earnings and profits which Taxpayer retained exceeded the reasonable needs of its business, including the reasonably anticipated needs of its business, which Taxpayer denies, such excess was not accumuleted by Taxpayer for the purpose of avoiding the income tax with respect to its shareholders. Taxpayer was not, there- fore, formed or availed of for the purpose of avoiding the income tax with respect to its shareholders or the shareholders of any other corporation by permitting its earnings and profits to accumulate instead of being divided and distributed within the meaning of Int. Rev. Code $532 (a). (4) Under any of the alternative contentions stated above, Taxpayer is not subject to an accumulated earnings tax liability under Int. Rev. Code §531 for the taxable year in question. Accordingly, the accumulated earnings tax deficiency assessed against and paid by Taxpayer con- stitutes an overpayment for which Taxpayer is entitled te refund. 43 Exhibit D A —— a9 rorm Ord f = a 7 . ¢ =o sa . seagate: amENDED Cec 23d ror REruND Cecete: tetths See Patere tt bew tue one The onseonel Revenve Seruce will indicate in the Block below the head of clam fled, and LMon, where required 0 Refund of Taxes Werolly, Crroneously, or Excessively Collecied. a Refund of Amount Paid for Stamps Unused, or Used in Error or Excess. 0) Abatement of Tax Assessed (not applicalile to income, estate or crit taxes). _— _ mee ee - rac + teen (Date recemwed) ~ Please Type or Paint Plainly —- a es Neme of taxpayer or purchaser of straps IVAN ALLEN_COMPANY_ Number and str eet $ City or town, Stute, and ZIP code P. O. Box 1712 Atlanta, — Georgia Fill in ep plicable KOMS—Uce attachments if necessary s. Yor Social security number | Wife's number, «f jor ant return 58-0136820 30301 b b. Employer identification number (if any) ~--—————- —— —_-— —-- — c. Internal Revenue Service ofi.ce where re- | d. ‘iume and address shown on return, of different from above turn (if any) was fied Dist. Dir. Georgia Same e@. Perod—if for ta tan yeported on annual basis, prepare separate form ¢ tor each tax able. year | t “Kind re tax July 1 65 June at 9 66; Income et . -sswosmsaness as ae oye 570$ 4 g. Amount of assessment 3% otrapent 5 367" RENT 576 b T268 99 167803 4 (683 10 >. 4 , 325,621.09 TVET att set a's 2 ba Pemeiel 157885" saint | h. —— Date stamps were purchased from Govern. i “Amount to be refunded (if mcome tax, | ». Amount to be abated (not applica! 's to income, es- ment cormpiete computation below) tate, or gift taxcs) $ 81,520.80* $ ie k. The claimart Deleves thet se m should Be etowed for the follow: rcatons. See Attached Statement BEST COPY AVAILABLE COMPUTATION OF INCOME TAX RCFUND 1 Tax withheld 2 Estimated tax paid. 3 Tax paid with original return . 4 Any additional income tax paid . 5 Total tax paid (add tines 1-4) . 6 Less: Your computation of cor.cct tax. 7 Amount of overpay:rent . 8 Amount previously refunded . Income Tax ae 34, 800. 00. a 200, : 20.95. | —Sss« 90, , 616.14 bs 325,621. 09 | 244,100.29 81,520.80* 9 Net overpayment (enter in item i above) . Under penalties of pequry. | declare that | have examined Uns claun, including accompanying schedules and statements, and to the best of my knowledye and belef it 1 true, correct, and Compicte. I iinicdiandiensicsaiacaamtuaniealibaniona Dated = Cc (wie 7a vecttens on pe ve wa iiew Too e ‘ ‘ ture R4: plu, : aT, 2605 uarel Interest, w it: 4 Dhaka 2c Cintheoon, as provided by sav’ or sstneshy cnt at SVMGSEEED KE atss BNA bees Pease te restuncable. 44 STATEMENT AMENDING IVAN ALLEN COMPANY’S CLAIM FOR REFUND OF INCOME AND ACCUMU- LATED EARNINGS TAXES PAID FOR THE TAXABLE YEAR 7/1/65-6/ 30/66 On October 19, 1970, Ivan Allen Company (herein- after referred to as “‘taxpayer’’) filed a Claim For Refund (“Claim”) of income and accumulated earning taxes paid for its taxable year 1966. This statement is filed to amend Taxpayer’s previously filed Claim as follows: (1) The Form 843 previously filed by Taxpayer is hereby amended in accordance with the Form 843 attached hereto and styled “Amended Claim for Refund.” (2) The “STATEMENT ATTACHED TO AND FORMING A PART OF THE CLAIM OF IVAN ALLEN COMPANY FOR REFUND OF INCOME AND ACCUMU- LATED EARNINGS TAXES PAID FOR THE TAXABLE YEAR 1966” is hereby amended as follows: (a) PAGE 4, SECOND FULL PARAGRAPH, which reads: “Taxpayer has paid the deficiency. This claim is filed for refund of the deficiency so paid, with interest thereon as provided by law, or such greater amount as may be legally refundable.” is hereby amended to read as follows (changes italicized): “Taxpayer has paid the deficiency with inter- est thereon. This claim is filed for the re- fund of the deficiency and interest so paid, with interest thereon as provided by law, or such greater amount as may be legally refund- able.” 45 (b) PAGE 4, CONTENTION (2) is hereby amended to read as follows (changes italicized): “(2) Under the contention stated above, the amount which Taxpayer paid to Mr. Allen, Sr. was properly deducted by Taxpayer under Int. Rev. Code §162(a). Accordingly, the de- ficiency and interest thereon assessed against and paid by Taxpayer constitutes an overpay- ment for which Taxpayer is entitled to a re- fund.” (c) PAGE 7, THIRD PARAGRAPH, which reads: “Taxpayer has paid the deficiency. This claim is filed for the refund of the deficiency so paid, with interest thereon as provided by law, or such greater amount as may be legally refundable.” is hereby amended to read as follows (changes italicized) : “Taxpayer has paid the deficiency with inter- est thereon. This claim is filed for the refund of the deficiency and interest so paid, with interest thereon as provided by law, or such greater amount as may be legally refundable.” (d) PAGE 8, CONTENTION (2) is hereby amended to read as follows (changes italicized) : “(2) Under the contention stated above, the amount which Taxpayer paid to Mr. Allen, Jr. was properly deducted by Taxpayer under Int. Rev. Code §162(a). Accordingly, the defi- ciency and interest thereon assessed against and paid by Taxpayer constitutes an overpay- ment for which Taxpayer is entitled to a re- fund. 46 (e) PAGE 10, SECOND PARAGRAPH, which reads: “For a number of years, including the taxable year in question, Taxpayer has held certain marketable securities. Substantially all of these securities, however, were of corporations engaged in businesses related to that of Tax- payer. Moreover, since most of the securities had greatly appreciated in value, Taxpayer would have had to incur a substantial capital gains tax to convert them into cash. For these reasons, Taxpayer’s management viewed the securities as business investments which were not available either for use in meeting Taxpayer’s reasonable business needs or for distribution to its shareholders. However, even if the cost of Taxpayer’s marketable se- curities are included in the computation of Taxpayer’s net liquid assets, the cost of one of Taxpayer’s operating cycles for the taxable year in question was still in excess of its 47 view the securities as a purt of Taxpayer’s net liquid assets. Rathe™. the securities were viewed as long-term business investments which were neither available for use in meet- ing Taxpayer’s reasonable business needs nor generally available for distribution to its shareholders. However, even if the cost of Taxpayer’s marketable securities are included in the computation of Taxpayer’s net liquid assets, the cost of one of Taxpayer’s operating cycles for the taxable year in question was still in excess of its net liquid assets deter mined as of the end of the taxable year.” (f) PAGE 11, FOURTH PARAGRAPH, which reads: “Taxpayer has paid the deficiency. This claim is filed for refund of the deficiency with interest thereon as provided by law, or such greater amount as may be ‘egally refund- able.” net liquid assets dete-mined as of the end is hereby amended to read as follows (changes of the taxable year.” italicized) : is hereby amended to read as follows (changes “Taxpayer has paid the deficiency with inter- italicized): est thereon. The deficiency was paid within ten days of the receipt of notice and demand issued in connection therewith. This claim is filed for the refund of the deficiency and interest so paid with interest thereon as pro- i t t engaged in businesses related to that of Tax- aan wy ae, OF ened —S— : we be legally refundable. payer. Moreover, since most of the securities had greatly appreciated in value, Taxpayer (g) PAGE 11, CONTENTION (1), FIRST SEN- would have had to incur a substantial capital TENCE is hereby amended to read as follows gains tax to convert them into cash. For (changes italicized) : these reasons, Taxpayer’s management did not “For a number of years, including the taxable year in question, Taxpayer has held certain marketable securities. Substantially all of these securities, however, were of corporations 48 “(1) The marketable securities which Tax- payer held and which had substantially ap- preciated in value were neither available for use in meeting Taxpayer’s reasonable business needs nor generally available for distribution to its shareholders.” (h) PAGE 14, CONTENTION (4), is hereby amended to read as follows (changes italicized) : “(4) Under any of the alternative conten- tions stated above, Taxpayer is not subject to an accumulated earnings tax liability under Int. Rev. Code §531 for the taxable year in question. Accordingly, the accumulated earn- ings tax deficiency and interest thereon assessed against and paid by Taxpayer con- stitutes an overpayment for which Taxpayer is entitled to a refund.” (i) PAGE 14 is hereby amended to add the following contentions (5), (6) and (7) with respect to the interest paid by Taxpayer on the accumulated earrings tax assessed against it: “(5) The accumulated earnings tax imposed by Int. Rev. Code §531 is not a ‘tax’ within the meaning of Int. Rev. Code §6601(a). Rather, it is either an ‘assessable penalty, additional amount or addition to the tax’ within the meaning of Int. Rev. Code §6601 (f)(3). Interest on such a penalty, addi- tional amount, or addition to the tax can be imposed only if it is not paid within ten days from the date of notice and demand. Tax- payer paid the accumulated earnings tax de- ficiency assessed against it within ten days of 49 the receipt of notice and demand. Accord- ingly, even if an accumulated earnings tax was properly assessed against Taxpayer, which Taxpayer denies, Taxpayer is not li- able for any interest on such tax.” “(6) Even if the accumulated earnings tax is a ‘tax’ within the meaning of Int. Rev. Code §6601(a), which Taxpayer denies, by virtue of Int. Rev. Code §6155, the ‘last date prescribed for payment’ of such tax under Int. Rev. Code §6601(a) is the date of notice and demand. Interest can therefore be im- posed on an accumulated earnings tax defi- ciency only from the date of notice and de- mand to the date of payment, unless payment is made within ten days of notice and demand in which case Int. Rev. Code §6601(f) (4) pre- cludes the imposition of any interest. Tax- payer paid the accumulated earnings tax assessed against it within ten days of the receipt of notice and demand. Consequently, even if an accumulated earnings tax was properly assessed against Taxpayer, which Taxpayer denies, Taxpayer is not liable for any interest on such tax.” “(7) Under either of the alternative conten- tions (5) or (6) stated above, Taxpayer is not liable for any interest on the accumulated earnings tax assessed against it for the tax- able year in question. Accordingly, even if an accumulated earnings tax was properly as- sessed against Taxpayer, which Taxpayer de- nies, the interest assessed against and paid by Taxpayer with respect to such tax con- stitutes an overpayment for which Taxpayer is entitled to a refund. 50 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION (Title Omitted in Printing ) ANSWER (Filed July 15, 1971) The defendant, United States of America, by and through its attorney, for answer to the plaintiff's com- plaint herein, admits, denies and alleges as follows: 1. Admits the allegations contained in paragraph 1, ex- cept denies that the internal revenue taxes sought to be recovered herein were erroneously and illegally assessed against and collected from the plaintiff. 2. Admits the allegations contained in paragraph 2. 3. Admits the allegations contained in paragraph 3, ex- cept denies that the taxes referred to therein were er- roneously and illegally assessed against and collected from the taxpayer. 4. Admits the allegations contained in paragraph 4. 5. With respect to the allegations contained in paragraph 5, the defendant answers as follows: Denies the allegations contained in the first sentence and alleges that upon audit of the taxpayer’s returns for 51 the taxable years in question, the Secretary of the Treasury or his delegate determined that the alleged salaries which the taxpayer paid Mr. Ivan Alien, Sr., and Mr. Ivan Allen, Jr., were not ordinary and necessary business expenses of the taxpayer. Admits the allegations contained in the second sen- tence. 6. Denies the allegations contained in paragraph 6, ex- cept admits that the Secretary of the Treasury or his delegate assessed against the taxpayer, for the years re- ferred to, additional income and accumulated earnings taxes, together with interest thereon, in at least the amounts set out in paragraph 6. 7. Admits the allegations contained in paragraph 7. 8. Admits the allegations contained in paragraph 8, ex- cept denies that no decision has been rendered on the said claims for refund, as amended, by the Secretary of the Treasury or his delegate. 9. Admits the allegations contained in paragraph 9, ex- cept denies each and every allegation of fact and each and every contention set out in the claims for refund and amendments referred to in paragraph 9 unless other- wise specifically admitted herein. 10. Denies the allegations contained in paragraph 10. 52 11. Admits the allegations contained in paragraph 11, ex- cept denies that the taxes and interest referred to therein were erroneously and illegally assessed against and col- lected from the taxpayer. 12. Denies the allegations contained in paragraph 12. 13. Admits the allegations contained in paragraph 13, ex- cept denies that the additional income and accumulated earnings taxes and the interest thereon sought to be re- covered herein were erroneously and illegally assessed against and collected from the taxpayer. 14. Admits the allegations contained in paragraph 14. WHEREFORE, the defendant prays for judgment in its favor, for dismissal of the plaintiff's complaint with prejudice, for costs and for such other and further relief as justice may require. The defendant requests a trial by jury. John W. Stokes, Jr. United States Attorney By: /s/ Stanley M. Baum Assistant United States Attorney (Certificate Omitted in Printing) 53 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION (Title Omitted in Printing) STIPULATION (Filed June 12, 1972) The parties hereto through their respective counsel stipulate and agree as follows: 1. This is a civil action instituted by Ivan Allen Com- pany (hereinafter referred to as the “taxpayer”) against the United States (hereinafter referred to as the Govern- ment) for the recovery of $212,132.53 in federal income and accumulated earnings taxes, including interest thereon, paid for the fiscal years ended June 30, 1965 and June 30, 1966. 2. Both factual and legal issues are presented by the case. One of the legal issues (set out hereinbelow in paragraph 15) is such that its resolution may be disposi- tive of the taxpayer’s claim for the refund of the accumu- lated earnings taxes involved. Therefore, such issue is hereby submitted to the Court for decision. Pending the Court’s decision thereof, the remaining issues in the case may, subject to the discretion of the Court, be held in abeyance. 3. The taxpayer is a Georgia corporation engaged in the business of selling office furniture, equipment and such other supplies as are used in offices and places of business. 4. For its fiscal years ended June 30, 1965 and June 30, 1966, the taxpayer filed its federal income tax returns 54 with, and paid the tax shown as due thereon to, the Dis- trict Director of Internal Revenue, Atlanta, Georgia. True copies of said returns are attached hereto as Exhibits A and B, respectively. 5. Following an examination of the taxpayer’s fed- eral income tax returns for the fiscal years ended June 30, 1965 and June 30, 1966, the Commissioner of Internal Revenue determined, among other things, that the tax- payer had permitted its undistributed earnings and profits for each of such years to accumulate beyond the reasonable and reasonably anticipated needs of its business and that one of the purposes of the accumulation for each such year was avoiding income tax with respect to its shareholders. Based upon such determination, $77,383.98 and $73,131.87 in accumulated earnings taxes, together with interest there- on, were assessed against and collected from the taxpayer for its fiscal years ended June 30, 1965, and June 30, 1966, respectively. Thereafter, and within the time provided by law, the taxpayer duly filed claims for refund of such ac- cumulated earnings tax and interest. When the claims for refund were not allowed, the taxpayer instituted the in- stant action alleging that such accumulated earnings taxes and interest were erroneously and illegally assessed against and collected from it. 55 6. At the close of its fiscal years ended June 30, 1965 and June 30, 1966, the taxpayer owned listed and unlisted marketable securities the cost and fair market values (FMV) of which were as follows: FYE FYE 6-30-65 6-30-66 Cost FMV Cost FMV 40 shs. Arlington Development Corp. common stock (unlisted) $ 1,000 $ 1,000 $ 1,000 $ 1,000 300 shs. C. & S. Capital Corp. common stock (listed) 1,650 788 1,650 825 - $600 Commerce and Jackson County Development Corp. bond (unlisted) 600 600 149 shs. Minnesota Mining & Mfg. Co. common stock (listed) 3,046 8,605 165 shs. Southern Airways common stock (listed) 600 1,650 11,140 shs. Xerox Corp. common stock (listed) 116,701 1,573,525 10,090 shs. Xerox ~ Corp. common stock (listed) 102,479 2,479,617 $30,600.00 Xerox Corp. convertible debentures (listed) 30,625 48,424 30,625 69,768 $154,222 $1,634,592 $135,754 $2,551,210 7. The cost of converting the taxpayer’s marketable securities into cash would have been the sum of . maximum of 6% of the fair market value of such securities (payable as a brokerage commission) and a maximum of 25% of such amount of the fair market value as exceeds the sum of the brokerage commission and the cost of the securities (payable as capital gains taxes). 56 8. For its fiscal year ended June 30, 1965, the tax- payer paid dividends to its stockholders as follows: Cash $48,945.30 870 shs. Xerox Corp. common stock (at cost) 6,564.34 9. For its fiscal year ended June 30, 1966, the tax- payer paid dividends to its stockholders as follows: Cash $50,267.49 10% stock dividend of Ivan Allen Company 10. In determining whether the accumulated earnings taxes involved herein were erroneously and illegally as- sessed against and collected from the taxpayer, it is nec- essary to determine whether the taxpayer’s undistributed “earnings and profits [were] permitted to accumulate be- yond the reasonable [and reasonably anticipated] needs of the business,” within the meaning of Section 533(a) of the Internal Revenue Code of 1954. 11. For the purposes of determining whether the tax- payer permitted its earnings and profits “to accumulate be- yond the reasonable [and reasonably anticipated] needs of the business,” within the meaning of Section 533(a) of the Internal Revenue Code of 1954, the parties agree that the taxpayer had reasonable business needs for operat- ing capital equal to $1,198,309.00 and $1,455,222.00 at the close of its fiscal years ended June 30, 1965 and June 30, 1966, respectively. 12. The amounts of net liquid assets (current assets less current liabilities) owned by the taxpayer at the close of its fiscal years ended June 30, 1965 and June 30, 1966, were $1,198,309.00 and $1,455,222.00, respectively, if its marketable securities are taken into account at cost, and $2,235,029.00 and $3,152,009.00, respectively, if its market- able securities are taken into account at their fair market value less the cost of converting them into cash. 97 13. If, in determining the amount of the taxpayer's net liquid assets at the close of each of the suit years, for purposes of determining the applicability of Section 533 (a) of the Internal Revenue Code of 1954, the taxpayer’s mar- ketable securities should properly be taken into account at cost, the taxpayer’s undistributed earnings and profits were not permitted to accumulate beyond the reasonable and reasonably anticipated needs of the taxpayer’s business. 14. If, in determining the amount of the taxpayer’s net liquid assets at the close of each of the suit years, for purposes of determining the applicability of Section 533 (a) of the Internal Revenue Code of 1954, the taxpayer’s mar- ketable securities should properly be taken into account at their fair market value (less the cost of converting them into cash), the taxpayer’s undistributed earnings and profits for each of such years were permitted to accumulate beyond the reasonable and reasonably anticipated needs of the taxpayer’s business. 15. Thus, the following legal question is presented for resolution by the Court: Whether, in determining the amount of the tax- payer’s net liquid assets at the close of each of the suit years, for purposes of determining the applicabil- ity of Section 533(a) of the Internal Revenue Code of 1954, the taxpayer’s marketable securities should properly be taken into account at their cost, as the taxpayer contends, or at their fair market value (less the cost of converting them into cash), as the Gov- ernment contends. 16. In the event it is determined that the taxpayer permitted its undistributed earnings and profits to ac- cumulate beyond the reasonable and reasonably anticipated needs of its business, a further factual issue relating to the 59 58 Exhibit A accumulated earnings tax involved in the case remains te. be resolved, i.e. whether one of the purposes of such ac- en 4 | UG. on BATT Oe TAN RE l— 1004 552471 5795) cumulations was avoiding income tax with respect to the Oh merge Mo yiat | __ ether tate a eomnen nnUL Seasse rin ea batt tT UBO BC 0S ik aves taxpayer’s shareholders. In the further proceeding, if JB bate pret 9 Or aa913522¢ 1563 to 52 5 $801 aie any, to resolve said remaining factual issue, either party AY, Rend oh correraren, Siti | [Reeves ru fF 6. County in which i. oa! -d. B. Conse! ed return. O : aaa Ful ton may, subject to pertinent objections, offer any evidence yy ” ee G; Ener total te from ice ° \e P » . ‘ instructi rs) 13 Sch. L (see 1:..tr ction F) therein which is not inconsistent with the matters stipu- we! $2.717.825.19 : =90, ee aa > lated herein. IMPORTANT—All applicable lines and schedules must be filled in. If the lines on the schedul»s cre net sufficient, see instruction O. 4. Gross receipts or Gross sales .....---2-cc-ceeceeeeeee----+--- Less: Returns and allowances .........----+-.-reeee=- $501 s2520..2... a : . 31 2. Less: Cost of goods scld (Schedule A) andor operations (attach schedule).........--+sseeeeeenees 1 0 «mata Heda l te 2 Se Sic June 12, 1972 /s/ Kirk McAlpin Bi ee ana wht Otte oentee ' i Paste GERSTNER 2,990,008. 15... Date Counsel for Plaintiff © | 4. Dividends (Schedule O).......csceeseeeeseeeeees pedgnidliebencuenscossevevonesoetoeeesscosncsdheensed 99129363... ; e) §. Interest on obligations of the United States and U.S. instrumentalities........ceeceereeeeer ee neee eee: Loreenennnsnssnnsnns aecseesrorne June 12, 1972 /s/ Jack D. Warren - ee) rrr rrr TT TTT rrrrTrTiTiTiTiTiririrrirrriririrrer et 13,5 35 76 Date Counsel for Defen d ant 3 Z nt OE RT RR ET EE eT Ere TT TT TTT TTT TTT itil etek eo 159,325. 7. 6. 64) 9. Net gains ‘lorses) from separate Schedule D....... oN Henay eR Sen SE en Ey ern emo ere wa & 17 O4 o 40. Other income (attach schedule). ........cccccccceeeeeeceeeeeeeeeeeeeeecnensnestesees Meewinee 176,267. ul il. pe EL errr rrr rrr errr rr rrrrrrrrerrrrrrrrrr rr: 2, 400,458 255 48. Compensation of ollicers (Schedule E)............cscseeeceserceseceeeseseneeecensesenescesenee ses [eanses 4293507229 13. Salaries and wages (not deducted elsewhere)... 6... cece eee cece eee e eee eee eneeerere de ovnes a ane 731. 33. 5 14. Repairs (do no! include cost of improvements or capital expenditures)... ...... 66... eee e eee Jee cence: [ennnnnnenens 8,255. 20... 18. Bad debts (fre Schedule F if reserve method is used)... 0... cece cece eee renee eee wene nent eee tt lenwenenad 1 1498.3 19 89. Taxes (attcch schedule)........ccccccccccccccccccccecsccseseseeeeseeescseseeseeeseeeeseeeasesss fawenwns 10 7402.33. BB. Bnteredd. .... cc cccccccccccccccvcceccvcscecccccesceesscseeseeeesseceeeeseeeseeeesseeseesesssses siecesncs .20;6 30.94. ¥ 19. Contricutions or gilts paid (attach schedule—see instructions for limitat.on). ©... 6... ceceeereeeeeeeees eeseeee QELS... . Q | 20. Losses by fire, storm, shipwreck, or other casualty, or theft (attcch ener mei ts 23. Amortization lattach schedule)... ..... cece cceccccccccvcccceccccvecseceeesseseessesseseeres ttt s[ecererocegspoonsennssnnzaonens BB. Deoreciation (Schedule G)....ccccccsccccccvvccveccccrcccccccecescereseesserereseeeeesesesesees sfeaesernes ° 4 395s 22 aiea B 83. Depletion (attach schedulle).......+.s-sssesseereeressersereserscecascnecseaseusansuscaecerss ses becnsuetnn seine see 2) BE. Advertising 2.0... ccc ccccccescccccccccccceecescncereenseeseees eeeeseeeeeerseeseereeeeseereres no RRR Re ike @ | 2S. (2) Pension, profit-sharing. stock bonus, ann'z'y Lh ty nt DOOD. o.oo iste cccnnceascececed Fouts )y900 «00 (b) Other employee benelit plans *? “nstreetions) . a -p SS ry ee a cae to le tl al aces rb ESOS Seat See 26. Other deductions (attach schedul@ : } iar ina neeanneveerees a geeeeeeeceeccccescssscseeens 244 113.95 27. TOTAL deductions in lines 82 615$.1656......... GES en eRe 22009 013.2% 28. Taxable income before net cperating | ie: setae 5 we SoeT deductions (line }1 less line 27)... ~~ We) PiLekes: sa 29. Less: (s) Net opercting lors rer n (see ingtpsc ery Cam acn schedule) abe (b) Speci! deductions (Schedule ater - mse |_ 50.399 .0% 50,399.52 | 30. Taxchle ircome ‘line 22 te +s ne 29). aa 341,05°.52 31. TOTAL incowe tan (from line 19, Schedule J)... ....cscccecescrcccsces gest seeees cess Pe 100, 335 _ - $2. Credits: (a) Tax paid with Ferm 7004 application for extersicn (attach copy)... 80,000.00 H (b) Payments ond credits on 1964 declaraticn of estincted tax . ny } 45,020.90 . fre See ee 12 (c) Credi® from regulated inv rhe Rte 34. If tax Cire 31) is less than c:edits (line 32).......... . Enter th> OVERPAYMENT here >| we 26. Ester amount of line 34 you want: Credited on. 1965 es.niaied tex = ...« Refunded . Undis Pens shes oS: per, ary. I ceciare taat | have excr..ce? this tetucn, inmc’uding occenm.cen;,.ng schecu. e383 Gnd sictement:, and tc ie kei ct my etuwledte ord celef it is true. correct. ard complete. Ut grepored wy: + ten ether then‘: rxpever, iis oslave nis based ca c!! informer. ct which he hes cny srow'e niqe. , “= 4 ee ob, j. - , ‘y a . gf. 7 (ue | tae Es” a ee FL ASS Becseapues: ay decile ; om r*"Bare Signeture ct si..-* Tite . CE ED Pud..* AT oCUNTNUTS ar’ "endian concecnsnenenenspersangsensees -0.+ coc seeee seenenace« ness eeeeneees eee “EIS LD TT Ts > naa che ae - — = — (Where investone are an a0 * + fsotor LIFO ©; ether O us other, attach explanation. oe... a ae nner enema =| 3. Have writedowns tren made to inveatory? Yes €) No O. ff : e:* 22397 “yo “ah p ienens aumadie he kasi 1. Inventory at beginniny of year 5405931.01 ait Penn thegna Nec ae pane Eye basis of PP At LEI OF AP ALN > 3K 679 (97 taSs. (If not available GE A7 Re 06 : estimate Gnd incicate that the figure is an estimate.) PEE s.cvecnecoudecdesaqueceeteseens ree) amt diters-] 3, Wes the inventory veriied by physical count during the year? Yes © No ©. ItNo” attach explanation of how the closing in- - entory w stermine 6. Les. Inventory at end of year $09,215.25! « W Be ne ps — al oh h 4 . « Inventory f y2 OY Se. - Was there any substantial change in the manner cf determining 7. Cost cf goods sold (enter here and on line 2. | . Quantities costs or valuations botw een the opening end elesing in (Nie ere insti ae te pa Se 1 can em a ventories? Yes (1) No (3. It “Yes, attach explanation. | Ms» 10 ® ~~ ea! NOTE I 9 direct answer connect be given to a Question attach erclanatoes, Schedu.e C.—INCOME FROM DIVIDENDS 2. Domestic corporstons | 3 Corte * preferred stock ate of Pedic wtites tasadie 1, Name of declaring corporat on ph LY ~ a wader chapter |. internal | © FOC? corporations | $. Other corporations ene Cose —_ eueeccccccossece Ms ov avy choenisnatccadeseionavesesanel ‘ CPE HOHE HHH HL nu reroweerooseosoooos Total (enter here and on line 4. page 1) Schedule ' 59,293 53 le D.—Separate Schedule D Form 1120 should be used in reporting sales or exchanges of property. (See instruction $) Schedule E.—COMPENSATION OF OFFICERS (See page 5 of instructions) 3. Time de- | Percent of corporation 1. Name and adress of officer 2. Oficial titie voted to | stock anes 6 Amount of 7. Eapeace account . business | F Eommon § Preteved compersaiict Hlowsves hein iathdiadiniciadiadabtincuiaihianeadeandaahidaainiaiecseauauad ; + de | REE OT im seed MMR a ES sae Total compensation of officers (enter here erd on line 12. page 1) a } Schedule F.—BAD DEBTS—RISERVE METHOD See instruction 15) ‘ae i Geusbte outstondrag siondecl yest 3. Sales an account & Griss {reas $ eee agarnst 6 Reserve tor os debts at eng om 2 —- [ - ie — — oa —— ETN TMM - sencituomniaies BID fewvene eoccesescesesusecensesesll eennsedetenecentesecacesensnees eseelin os «s-seesiegeemens-enneneinicsenmdiieeimnlenasenelseienennenssnniannnnnnnnnnnnnnnnInIEnannnn ERS, ia HOS suvindatinbistoasenmabaaaa 1964 .|..... siiesiasitalabltaina ; : sacteces ssqveliedtadanibiaiibiiden sienna "NOTE. Securities which are captal arsets ard which hecame worthless within the tacable year should be fepered mescaraeScedeD Schedule G.—DEPRECIATION (See instruction 22) This schedule is dengred for texpayers usirg the clternative gu.delires and admiristeauve procedures described in Revenue Procedure ane " e base as - -re ‘ } 5 6: ~21 as well as for those taxpayers who vish to continue using procedures authoritd prior ta the Reverue Procedure. Where double headings appear use the first heading for the new procedure ard the second heading for the elder procedure. cs aL EL Ry ieee mi peat ante A . | 2. Cost or other tosis 3. Asset addons 1. Group ard i. deline clas at Des rmng of: vor in yet atocet ‘ bp ppt $. Depreciation € Memos ly Cop ite endtaa Desert Sen — | aon = 1 ae ok ghee EEO 24 to | Mew OF 2M IDIe | comeing | Rate i=) . ae " Ps ° ets -) t or we eee va A 4 - } is acq. red Res. Proc. 62-21) ® prot pears Geprec ation | ore 8. Total additional first yeer depreciation (do not include in items below) > 2,009.00 shiestnendcniadsdinentanbanéeniel onal pa ers.) eovioaiaidad Epes” aa == |r sseces-eeeeen enna] ons-seseseeeeeneeesafeesenenenenees a nel ceedecsoutiiiigsinaasaaaaannaiiaiae ; EPEAT IT: TRIE Rar. | ‘Serie Ee 00-8 Oned 11€@ | | | | 21 370 RO = Seer lester ere vee eceseseeeece itt te en es} 2 . a Ee - ° - . ay PEED ss 0seusanexcucoaauees £.5¢ r Ss Seabees 50 0.0.0.00060608060-0615i605 eu naliineinanennnnennnnnnnnn 3. Less: Amount of depreciation claim=d in Sched:te A and elsewhere on return. ............ leckcn eae ‘ 139,5¢'.58 4. Balance— Enter here end en line 22, page ! a Scan puntesepecueesnas she ..| 64,395, 22 $. Cost or other basis of filly depreciated aciets st! in ue | | 25 16— Te iss t 61 U.S. TREASURY DEPARTMENT —INTERNAL REVENUE SFRVICE rom 103+) | APPLICATION F°? AUTOUATIS EXTENSION OF THIF 70 FILE U.S. Co2PORATION Rov. Fed. 1599 INCGE TA. RETURN (SEC. GO31(b), INTERTAL .cVENUE CODE OF 1854) | (See Instructions on roverse sido) | For taxable year beginn.ng ......... duly 1, 2 en mes 194 and ending ‘impisenl koe . 19.65 PLEASE TYPE OR PRINT PLAINLY e of cor poraLon Serial No. IVAN ALLEN COMPANY ond street U an exiers.cn of time is necessary, file this form with the District Director of In- ternal Revense on or belore the 15th day of the third month following the close of the texable year. BOX 1712 City oF town, posta: sone numoer, ATLANTA, GEORGIA 30301 Application is hereby made for an automatic extension of three months for filing the completed return of the corporation named herein in accordance with the provisions of section 608! (b) of the Internal Revenue Code of 1954. Or hatte A remittance of an amount not less than would be required as the first insta!lment of the tax tentatively determined to be due for the texab’e year shown above cccompanies this application. 1. Tentative amount of tax for the taxable year... 6... e cee cee eens Gene aVE ey 2. Less: Payments mace on decicration of estumated tax sinned ¥edeseedeesenes Monel 46 2020.00 i ss eimeees ACT OD ' 4. Amount of remitiance. ....... ........ SIGNATURE AND VERIFICATION I declare under the pena!ties of perjury that | have been authorized by the above-named corporation to make this application and thc. to the best of my know.edye and belief the statements mace herein are true and correct. I declare under the pens!'.es of perjury that | am currently enrolled to practice before the Trea. ry Department and have been authorized by the chove named corperat.cn to make this application; and that to the best of my knowledge and beliei the statements made herein are true and ccrrect err ee reer te ferer rs «OO Oe Oe Oe ees ee eee eRe rene eee e es ereresen) Seereresesesoee (Address) ; (Name of tiem, if any) A COPY OF THIS APPLICATION MUST BE FILED WITH THE TAXPAYER'S COMPLETED RETURN as SCHECULE D US. Treasury Department - internat Revenue Service j (Form 1120) GAINS AMD LOSSES FRO.i SALES OR EXCHANGES OF PROPERTY 1964 Name and address IVAN ALLEN COMPAITY - ATLANTA, GEDRGIA PART d; _—GAIN FROM DISPOSITION OF lenny ey PROPERTY UNDER SECTIONS 1245 AND 1250—Assets Held More Months—Where double appear, use the first heading for section 1245 and the second heading for section 1250, ; @ Cost of other Dass, cost of 8. Kind of property (if necessary. attach statement of © Date acquired ¢ Date sold 4 Gross sates price subsequent improvements (it Gexcriptive detais mot snuwn Delow, (wo, day. yt) (me., day, yt.) Mot purchased attach expia- nation) and expense of sale Ca ne a Rn ES eT RN = > i £. Depreciation allowed (oF allowabdie) since acquisition } (attach scheduie. H | b Oday Januar December owdeon ation 1-2) ay =. .._ ery ew Oe. Se nj. 412 | (see instructions) Prior to Jarwary 1, 1964 After Decem er 31, 196) | STEEN ee womens | ee Bases Caras teen en me ee | ee Rae eeeaeres | > . Ps 2. Total ordinary gain. Enter here and on line !1 and identify as gain from PartI ...... = 3. Total other gain. Enter here and on line 4 and identify as gain from Part I ae PART II].—SALE OR EXCHANGE OF PROPERTY UNDER SECTION 231 | | Depreciation atiowes! Cast cv omer basis, | & Kind of property (it _ attach statement |b Date acqui Date eid 5 1% owed’ cost of subsequent im- Gi descrip ve Geta's not shown below | (eo. don yt) | tattech statement) A Ra te epee tae | ns 8. Total of short term capital gains or .csses or difterence between short-term. can:tal gains and losses ae "ue Copitel Gairs and Uosees— avis Hel More Then a REET Re AOS ® ..100.sh. Ivan Allen... EU | RFS ..0A....0f Augusts.... 4958. 8-216) Re emirates BK ~ | -ba00500.. nk 2065 00 - 20. sh...Ivan.Allen... a . a a »..0f. Rome... sf 6230-635 =20-65 (A 1,367.80. 14379276. ef A796) | SN LE EE! Rhee aia 10. ‘Total of lonc term ec capi east on tins of losses or dit. rer.ce betweer, long-term catital gains and losses 1,657.04 IV.—PROPERTY OTHER THAN CAPITAL ASSETS > os ‘ ‘ at . 12. Tetol net oain for los) Enter here and or line 15 patie anaes vo raas7-1 Scinedule D (Form 1120) 1964 — aa Page 2 PA. /.—TOTAL SCHEDULE D GAINS AND LC _ Ss 13. Enter the excess of net short-term capital gain (line 8) over net long-term capital loss (line 10)............- Pisalllicadtsciditiatiaatiamlides 14. Enter the excess of net long-term capital gain (line 10) over net short term capital loss (line 8}............... nee bg 657208 18. Net gain (loss) from property cther than captal assets (line | 2). 16. Total lines 13, 14 and 15, enter here and on Form 1120 page-!. line 9. Alternative Tax Computation (Component members of controlled corporate group use Form 3920 to compute your tax) 17. Tazable income (line 30, page |. Form 1!20)........ ee ee ee 18. Net long-term capital gain reduced by any net short-term capital loss (lime 14)... .. 20.6.2 .ceceecee ee eee] 1,657.04 ih nin... the — not —— as a deduction against any net carital gains of ary taza year intervening between the toxable year in which the net capital loss was sus tained and the taxable year to which carried. Definition of assets.—The term “capital assets” means property held by the taxpayer (whether or not connected with its trade or business) but does not include (1) stock in trade of the taxpayer cr cther property of a kand which would properly be included in the inventory of the taxpayer if on hard at the close of the tazable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of its trade or business; or (2) property used in the trade or busiress ot a character which is subject to the allowance for depreciction in section 167, or real property used in the trade or of the taxpayer; or (3) certain copyrichts, literary, pa OF artistic compositions, or simular properties; or (4) accounts or notes receivable acquired in the ordinary course of trade or business for services rendered or from the sale of property described in (i) above; or (5) an obligation ot the United States or any of its possessions. or of 3 Stute, or any pelitical subdivision thereof, or of the District of Columbia, issued on or atter March 1, 1941, on a discount basis and payable without interest at a fixed maturity date not exceeding | year from the date of issue. Basis. —In determining gain or less for property acquired after nt February 28, 1913. use cost, except where property was seguires | 4 sale or exchange, direct!y or indirectly. of property between an . gift, tax-free exchange. involuntary conversion, or wash sale stock, see sections 1014, 1015, 1031. 1033. and 1091. re | > it che amount shown as the basis is other than actual | cost of the property sc!d or exchanged. tul! details must be furnished regarding the acquisition of the property. Losses on securities bec worthless. —!{ any securities becor.e worthless within the taxable year and are capital assets the loss resulting theretrem shall. than a bank, as defined in section 531, be considerea as @ loss from the sale or ex->ange. on the last day cf zuch taaatle year, of capital assets ction 165(g)(1). Losses rot allowable. No loss is recug Stock or securities. Sect.on 1091 No loss is allow ved lencegt distributions in |.7u.dst.on) between 4d persons. Sest.on 267. nized for wash sales cf (Instructions continued on severse of duplicate) in the case of a texcuyer other | electrical energy gas, water, or sewage disposal services, or used asa research or storage facility in connection with these activities; and (c) elevators or escalators. as provided below section 1250 means de- precicble real property (cther than section 1245 property). See sections 1245(b) and 1250(d) for and limita- tions invol ? (a) disposition by gift, (b) certain tax. tree trans- actions; (c) like ind exchanges, involuntary conversions; and (d) sales or exchanges to cies and exchanges to comply with S.E.C. orders. Column f of Part I.—In computing depreciation allowed or rllowaple tor clevators or escalators enter in column {1 deprecia- tion prior to July 1, 1963, and im column {2 depreciation after June 30, 1963. Column i of Part I, section 1250 property only.—!! held for more than 6 months. but not more than | year, enter the smaller of a column h, or (2) column f-2. It held for more than | year, enter the result of multiplying the smailer of (1) column h. or (2) column {-2 less the amount of depreciation competed for the same period using the straight line method. by the percer.tage ottained by subtrecting trom 100°%. one per- centage po:nt for each tull month the property was heid 4 In excess ot 20 months. Where substantial improvements have been made within the preceding ten years. see section | 250(f). Gain on sales by a “‘controlled"’ corporation. —In the case of individual and a corveration more than 80 percent in value of the outstand:rg stock ot which 13s owned by such individual. his spouse. and his minor children and :..nor grandchildren. any gain recog mized to the transferor from such sale or exchanze shall be treated @s gain trom the sale or exchange of property which is neither a capital asset nor property described in section 1231, if such prop- erty in the hands of the transieree is depreciabl onder section 167. Section 1239. Installment sales.-—-!f you sold personal property for more than $1.000 of rea! property regadless ct amount. you may be eligible to repert any ga:n u ince: the installment plan if (1) there 1s no pay: ment in the year of scle cr (2) the payments in the year of sale do not exceed 3JD~. of = seiling price. Section 453 For treatment cf a pertion of payments as “unstated interest’ | on deterred payment sales, see Section 483 16 Teaer-s Scnucule D Form 1120) 1965 Page 2 Pe... V.—TOCTAL SCHEDULE D GAINS AND LOWES 13. Enter the excess of net short-term esp.tcl gain (ine 8) over net long-term capital loss (line 10)............... IVAN ALLEN COMPANY - ATiaANTA, GEORGIA 14, Erter the excess of net long-term cap.tel Gain (line 10) over net short-term capital loss (line 8) 1,657. ou 18. Net cain Giezs) from property other then capital assets Dine 12).........c cece cececececeees CSET. “Rare Year ended June 70, 1965 16. Tete) lines 13. 14. and 15. Enter here and on Form 1220, page 1. line 9... ... 2... eee eee eee e ee: 1,057.04 Alternative Tax Computation Ser SSSswSr Sse str SSSS ST SSSS IPS SS SVS UNAS PSS SST BAS SSHSS TTS St HSS SSSSSSEVsSSsSseseras=rs (Component members of controlled corporate group use Form 3320 to compute your tax) pons Printing 341,045.52 12. Taxable income (ine 30, page 1, Form 1120)..... 0... 0... ecw cece wee eees eT a CF OL” SS SESS SS SES SSS SS SHS HS SSS STS SSS SSS SSS SSS MS SST SS SS t iSSSe “=ses l 18. Net long-term cap.tci gain reduced oy any net short-term capital leas Gin 14). .oooseessseeossness eee: me RAT SO Seventery - materiale, June 30, 196+ $ 3,97%.10 $ 68,702.95 i SONNE GEE... cccmnenspendsevetonsncosedte me PB ok Purchases - materials 1,499.35 523,110.08 20. If amount of line 19 is: | Freight P 84 5 75,00: 2 aS 59 Boop COST OF GOODS MATUFATTURE> ee ee eee eee ee ee EE ee ee en (b) Over $25,003—Enier 46 percent of line 19........ shenaiaitiniainidceiiinieattaaitatattsadil 162,906.61 = Less inventory - materials, Cune 20, 19465 5,498.10 65,155.96 Subtract $4500 and enter difference. . Controlled. -.5,000.00...... - 157,906.61 MATERIALS USED OR EPEE 520, ER G 21. 25 percent of line 18...... pnamewe eegntecncacesens sueseses eneeeséeeeeceesse jendennateneses ebenneese 414.26 Direct labor ‘ 22. Alternative tax Cine 20 plus line 21). I applicable, emeante’ Schedule J, om 1220, and write “alt.” in Manufacturing expenses: the marain to the rth of the entry :, stile = RAE a ere 158,320.87 | Labor - indirect INSTRUCSTICLIS Payroll taxes (Refezeaces exe to the Internal Revenue Code) Rent - building - equ n Gains and !osies from sales or exchances of capital cssets | Gains from section 1245 or 1250 property held more than 6 qQuipment and others pzeperty.— Report sales or excr.anges of capial @ssets | months (Part I).—(Report any gain from such property Heat » power and water end sales s exchanges cs property Other than capital cssets in | held for 6 months or less in Part IV.) Except as provided Deprec tation €quipmen: Schedule D. Every sale or excrazge of property, even though no | below section 1245 property means depreciable (a) persona! prop- ? gain or loss may be indicated, must oe reported in detail. erty aver pm) pemenene ey untangi cle ee aed Insurance non Lasset (bd) tangiole rec prope: ty (except for duildings and their structu - oot sales w cxshongna sl enptal exets chal by alowed | TESTIS: dustd coat coneeal panel sanciosbonay, pontor Taxes, general the amount 0: a net cap.tal joss susta.ned wn an taxaole year may 808. Or extraction, or of jurnishing wansportation, communications, Maintenance - *quipmnt be carne 3 over to each of the ive succeei.ng taagele years (or electrical energy. Gas, water. or sewage disposal serv. 228, OF & to the exten: such loss is @t:sDutacie to @ io: reign eaproprianon lots | 98 @ Tesearch of storage facility in connection with these actuwities; 3,557.68" 16,632.35 Supplies - depar*menta- 6,287.5 3,584.34 to each of the ten succeeding taxabie years). A net capital loss | @n (6) evevators or escalators. - litho - 5,211.06 shall be ee in eGch Such sucsued.c.3 tazacle year as a Except as Proviced below section 1250 Prt yaw means Ce- - letterpress a 2,271.62 short-term ¢ap.ta! loss to the extent not c.lowed as @ deduction | Pfeci@b.e feat propesty (other than section 1245 property). shee > 608.4 5,498.01 Qgs.nst any het cap. a) gains of any tauable year intervening Sce sections 1245(b) and 1250(d) for exceptions and limita- = COmpos.%t.on «OU. 23 ’ . between the taxcb.e year in which the net capital less was sus- tions involving: (a) c.spes uon by Gut; (o) certain tax tree trans- - cutting machin= 76.87 456.19 teined ond the tcxch.e year to waich carried. @ct.cns, (c) lise sind eachanges. involuntary Conversions; and (d) Defin.tion of ecpitel essets.—The term “cop.tc] assets” Mesns property heis by the taxpayer ‘whether or not connected with its trade or Susiness) Dut cows: Rot inc.uce (3 ) sice ck in trace 3 the taxpayer oF Other property ¢ 8 @ bing which would propery M the inversery oS the toxpsyer d on hand at tie dae ci the tcask:- yecr, or property heid by the taxpaye: Pre 3s..." .C2 53.2 ° Customers in the ordinery course of its trace “ Gr S...:..58; OF |. Property used in the trace or Business, cf Sata w..ck 2 sudject to the Giowance for cepreciat.on ercv.ded it. ..at OF Tesi property used in the trac Business © » % COpYT-GAts, Gusicai, Or Grtisiic OF properies; or (4) | ecco! ts OF Be oS FEC VAS. 3 ix. the cranary course of trode oF Susr eee 31,025.00 1,919.89 en aiken roe awed of potty Ga. 100.00 He C. Jones, Exec. Vice-President 27,524.92 2,039.95 Ivan Allen Co. of Athens, Tenn. 66.67 W. F. Floyd, Jr., Sec. -Treas. 21,224.92 706.47 Ivan Allen Co. of Augusta, Ga. 66.67 Je H. Carnes, Vice-President 22,159. 32 706. 30 Ivan Allen Co. of Chattanooga, Tenn. 100.00 a a create Ceodunctient 2b 824.92 860.57 Ivan Allen Co. of Columbus, Ga. 66.67 o> & Warp, Vicostvesisent 17,021.92 3,423.05 Ivan Allen Co. of Gainesville, Ga. 90.00 P Ivan Allen Co. of Greenville, S. C. 60.00 g 238 Ivan Ailen Co. of Huntsville, Ala. 100.00 Ivan Allen Co. of Macon, Ga. 66.67 Ivan Allen Co. of Rome, Ga. 96.7 $176,287.42 Compensation Expenses Year ended June 30, 1965 QUESTION I (1) FEDERAL RETURN TAX SCHEDULE - 58-0136820 IVAN ALLEN COMPANY - ATLANTA, GHORGIA Year ended June 30, 1965 TAXES City, state and county Intangibles Domestic corporation Corporation registration Business licenses Automobile and truck Pay roll Less taxes charged to cost of sales GEORGIA Georgia income tax - current years - prior years CONTRIBUTIONS Atlanta Humane Society Georgia Cumberland Conference Exchange Club Oglethorpe Boosters Club Marion Howard School Junior League Florence Crittenton School Bopty Stocking Fund Buckhead Lions Club North Fulton Fine Arts Foundation Christian City Salvation Army Allen Foundation: Cash 100 shares Xerox Corporation = cost 2-24-61 $641.98, fair warket value 1-29-65 Less contributions carryover - federal CONTRIBUTIONS + FEDERAL 2 B328 13,854.32 $17,683.57 2,676.50 20,360.07 $103,402. 33 $ ~ Vi ~ FEBSES Be ou oO . S8S88s8ssEsess8 BSR2 69 TAX SCHEDULE - 58-0136820 IVAN ALLEN COMPANY = ATLANTA, GEORGIA Year ended June 30, 1965 BALANCE SHEETS Other investments: Marketable securities Investments in subsidiaries Other assets: Cash value of life insurance Prepaid expenses Leasehold improvements - net Other current liabilities: Income taxes Other taxes Accrued salaries and weges Accrued interest Accrued profit sharing pension contribution 6-30-64 6-30-65 $161,428.56 $154,222.25 _ 318,525.55 351,141.38 $479,954.11 $505 , 363.62 $162,645.52 $176,864.5¢ 39,695.35 28,811.61 23,096.13 19,829.13 $180,752.36 $151,521.21 76,274.09 89,819.47 10,037.53 16,557.5 432.67 4146.6 59,257.06 59,786.7 $326,753.72 $318 099.89 70 mame eee AS Som ress Taser yess * STATEMENT OF RETAINED EARNLAGS - soot mer Seams tee _—s acm. arene SVAN ALLS COKFAAL © Paadista ry GECRGIA Saoeacseeaesseseasessessesesessestese Sa ce ses ease estes ss HS SSS SSS Sh S95 SSS SESS SS SSNS SS SSS HBSS Ss SSS SSS ses Retained earnings, June 30, 1954 $1,997,242.28 Adc: - + s - = * ‘ Not income for the year ended June 30, 1965 $232,584.98 Excess of fair market value over cost 100 shares Xerox Corp. stccx donated *% “7 Sol . = ’ Allen Founéation: Fair merket value 1-29-65 10,800.00 Cost 41.98 10,158.02 Reverue Agent's adjustments for F.Y.E. @30-63 and 6-20-64: Capitalization of essets previousiy chargeé to expense $43,696.12 Reduction in ellcewedle depreciation 685.56 Reversal of sccerusl of contridution to Alien Foundation not timely paid 7,500.00 §5:,681.70 2904 624.70 t ior years’ incoze taxes: Federal $33,496.07 Georgia 2.676.509 $ 26,272.57 Divicends pais: Cash $45,955.30 870 shares Xerox Co. stock - st cost 6,564.24 $5,509.64 $1,662.21 RETAINED EARNINGS - JUNE 30, 1965 $2,200,184.77 BEST COPY AVAILABLE 71 STATEMENT OF PROPERTY PLANT AND EQUIPYENT \ a - os bVahec nes? ‘. 4a? ¢.0.%' *, . , Taaae ~ - - LL ale “— - Pr re , + IVAN ALLEN COMPANY - ATLANTA, GEORGIA SFiS . S i. -/ 7 4 Year ended June 30, 1965 emake el reeled pone ® a, SPs , ; SSSSsessSsessseseseeseseeseseeoessersseesse sere ssesseseseserecrcsrssssessescseeescc ee eee se —= SSS SSeSesesee FS (SS SESS SS SSS SSS SS SSS SS SS SSS SH SSS Se SSS SSS SSeS SSS SSS SSS SSS ee et esses eee ese: a Assets Allowance for depreciation Cost less Balance Balance ~~ Balance Balance depreciation Jun. 30,1964 Additions Disposals Jun.30,1965 Jun.30,1964 Provision Deduction Jun.30,1965 Jun. 30,1965 Rental property: Land . 972 Marietta St. $ 35,250.00 $ - §$ - $ 35,250.00 - ¢$ ° $ a $ - $ 35,250.00 1740 Peachtree St. 120 ,000.00 - - 120,000.00 - © e e 120,000.00 221 Ivy St. 74 ,000.00(C) 76,000.00 ° 150,000.00 . 7 a . 150,000.00 660 Forrest Road 72,000.00 - - 72,000.00 - - ~ ° 72,000.00 Buildings: 972 Mariette St.: 1948 - 3% 81,997.69 - - 81,997.69 39,768.85 2,459.93 - 42,228.78 39,768.91 Improvements: Sprinkler - 1948 - 54% 9,937.00 - 9,937.00 7,436.16 496.85 7,933.01 2,003.99 Roof - 1955 - 104% 4,097.84 ~ 4,097.84 3,892.91 204.93 4,097.84 * 1740 Peachtree St.: ; 1959 - 5% - (A) 183,078.48 - - 183,078.48 44,957.41 6,906.05 - 51,863.46 131,215.02 Improvements - 1959 ~ (A): Elevator - 10% 15,500.00 - 15,500.00 6,805.02 869.50 7,674.52 7,825.48 Blacktop - 13.3% 6,900.00 - 6,900.00 3,747.42 419.29 4,166.71 2,733.29 Electrical - 13.3% 31,000.00 - - 31,000.00 16,831.40 1,884.42 18,715.82 12,284.18 Plumbing, heating and air-conditioning - 13.3% 63,000.00 - 63,000.00 34,105. 73 3,842.94 37,948.67 25,051.33 Carpets, etc. = 20% 9,000.00 - 9,000.00 6,345.79 530.84 - 6,876.63 2,123.37 221 Ivy St.: 1960 - 44 177,012.25(C) (76,000.0C) - 101,012.25 24,781.72 4,040.49(C) 6,300.84 22,521.37 78,490.88 1963 addition - 44 428,754.03(C) 16,011.11 - Uhh , 765.14 25,725.24 17,790.61(c) (1,189.02) 44, 704.87 400,060.27 1963 roof - 54% - (c) 8,156.00 8,156.00 - 407.80(c) (407. 80) 815.60 7,340.40 1963 waterproofing and sign 20% - (c) 9,190.54 e 9,190.54 ° 1,838.10(c) (2,103.67) 3,941.77 5,248.77 660 Forrest Road: , 1964 - 5% - (A) 121,058.94(C) 3,500.00 124,558.94 6,227.95 6,227.95 118 , 330 $1, 432,586.23 $36,057.05 $ = $1,400,453.00 . . Furniture and fixtures: Store - 1961-2 254 (a) $ 2u9.2h ¢$ - $ - $ 249.24 124.12 $ 31.28 - $ 155.40 $ 93.84 = 1962-3 25% (A) 161.41 - - 161.41 55.49 26.48 - 81.97 79.44 Plant - 1958 204% (A) 3,562.74 ° - 3,562.74 2,722.18 168.11 - 2,890.29 672.45 Office - 1956 20% (A) 4,736.12 . - 4,736.12 4,020.98 143.03 - 4,164.01 572.11 - 1957 20% (A) 388.88 : aw 388.88 314.82 14.81 - 329.63 59.25 - 1959 20% (A) 10,746.29 - 7955-50 2,790.79 8,210.92 131.57 6,078.00 2,264.49 526.30 - 1961 20% (A) 3,675.00 - - 3,675.00 1,981.56 338.69 - 2,320.25 1,254.75 ~ 1962 254 (A) 1,673.01 . - 1,673.01 833.13 209.97 - 1,043.10 629.91 - 1964 254 (A) 3,960.00 - - 3,960.00 495.00 866.25 - 1,361.25 2,598.75 - 1965 254 (B ° 7,439.50 . 7,439.50 : - 083.06 ‘ $29,152.69 $ 7,43 69 72 STATEMENT OF PORPERTY PLANT AND EQIUPMENT = CONTINJED IVAN ALLEN COMPANY = ATLANTA, GEORGIA Year ended June 30, 1965 soecsssesesesesee see seeseeees FR RI melanie aa ee eee ctor TaTGE desrecinerone un. Yor t 1sposga.s ° Lo cemererecencecnensniel neta rans nenenensitanen eee NS _ Seatteten saponins senass 30,1965 Jun. 30,1965 Automobiles and trucks: ee M1961 Falcon - 66 2/36 (A) 606.78 606.78 1961 Falcon - 66 2/3% (A $1 78 3 - $ - 8 4 ° 1,472.88 1962 Chevrolet - 66 2/3% (A) 3,471.22 2 ° 3,471.22 . 2/699 .8l $ aa mp >= @ 1,562.13 $ uh. 1964 Oldsmobile - 33 1/3% 3,114.68 - - 3,114.68 1,048.22 1,028.22 - a * 1964 Chevrolet - 33 1/34 2,999.11 - - 2,999.11 498.18 999.70 : ie ae 1,038.24 1964 Cadillac 5,706.21 - 5,706.21 - 951.03 . 991.03 , 497. 1,501.23 = Ford Mustang ‘ 3,281.24 aa - 3,281.24 in - 546.82 " 5k6.82 . - 1965 Cadillac - 33 1/3 - 581.09 - 581.09 = . ae - - -Y* department: « , ee 2,193.70 . 2,193.70 4,387.39 1960 G.M.C. truck = 50% (A 3,783.11 ° - 3,783.11 3,605.77 88.67 1962 Ford van 1,695.30 - 1, 695.30 ° i’554.0 . 3,694. bl 88.67 1963 o/34 (A) stake - , . 9598-08 1,554.03 S - 66 2/3% (A 1,917.35 - ° 1,917-35 1,065.19 568.20 . oP aaa 5 fag ew = Bgeatie 1,938.23 1,938.23 = HERS, 95883 e van - - «10 - ° a ° , . ——— department: 5 a ‘ , : , 654.03 654.03 1,308.07 1962 Chevrolet panel - 66 2/3% (A) 2,230.61 - - 2,230.61 1,735.41 10 = — Cheveeies S.W. rea 2,330.31 ° 2,330.31 : we 27136.13 330: asst 2,065.51 165.10 1 Chevrolet S.W. - 33 1/3 2,457.03 - - . 4 B49. e mers delivery: : : , rated 9.02 1,258.48 1,198.55 1962 Ford van 66 2/3% (A) 1,476.20 - - 1,476.20 1,353.19 82.00 ° 1962 Ford van 66 2/3% (A) 1,433. 1 ° - 1,433.31 1,313.87 79.50 - ae 3.98 1962 Chevrolet stake - 66 2/3% (A) 1,772.89 - - 1,772.89 1,379.30 262.25 o 1,601.55 1 1. 4 1962 Corvan 2,253.05 - 2,253.05 - 2,065. 31 8065.3 _— 31-3 1962 Chevrolet panel - 66 2/3% (A) 2,062.21 - 2,062.21 - 1,604.39 a 1,604.39 x a 1962 Chevrolet panel - 66 2/3% (A) 1,682.1 e -_ 1,682.13 1,308. 248.85 e 1,557.55 124.58 1963 Ford van - 66 2/3% (A) 2,012.38 - - 2,012.38 1,565.63 298.00 " 1863.63 118.75 1964 Chevrolet panel - 33 1/3% 1,868.96 ” © - 1,868.96 311.55 623.00 - "93h..55 93h. 1964 Ford van = 33 1/3% © 2,054375 - 2,054.75 e 342.45 - 312. bs 1, 712.30 1965 Chevrolet panel - 33 1/3% - 2,358.31 - 2,358.31 e 373.05 - 373.05 ae ae 192 Chevrolet panel - 33 1/3% ° ay ores - ny = 361.50 2 gp ie 965 Chevrolet panel - 33 1/3 - 1,836.3 - ° = 306.06 oa f ? nage yn ee ; : a 306.06 1,530.28 1965 Ford - 33 1/3% - 1,392.00 - 1 : - 2.00 - 232. $US.) HO, 353.52 Se eS 22 BEST COPY AVAILABLE - 73 STATEMENT OF PROPERTY PLANT AND EQUIPMENT - CONTINJED IVAN ALLEN COMPANY = ATLANTA, GEORGIA Year ended June 30, 1965 rs peeeessencescessessseessssseses sss ses Ss SS SSsss ss seSses SSS Sess sssssse Assets Allowance for depreciation Cost less Balance Balance "Balance “Balance depreciation Jun. 30,1964 Additions Disposais Jun. 30,1965 Jun. 30,1964 Provision Disposals Jun.30,1965 Jun. 30,1965 fechinery and equipment: - Printing plent: 6 1/44: 1946 3 295.00 $ - $ 295.00 $ - $ 285.82 $ 9.18 $ 295.00 $ - $ - | 1947 11,899.60 - - 11,899.60 11,699.60 - - 11,699.60 200.00 1947 29 ,000.00 e ° 29,000.00 28 ,500.00 - - 28,500.00 500.00 1949 T 200200 - 7,200.00 - 7,038.00 162.00 7,200.00 - - 1950 455.00 e - 455.00 412.38 28.44 - 440.82 14.18 alin 12,875.20 - - 12,875.20 10,863.45 804.70 - 11,668.15 1,207.05 A): 1954 42,135.00 7 - 42,135.00 37,836.99 859.60 ° 38,696.59 3,438.41 1956 16,600.00 © - 16,600.00 14,093. 38 501.32 - 14,594.70 2,005.30 1957 3,858.00 o o 3,858.00 3,129.82 145.6% - 3,275.46 582.54 1958 26,527.99 - - 26,527.99 20,269.24 1,251.75 - 21,520.99 5,007.00 1961 10,225.00 - - 10,225.00 4,335.40 1,177.92 - 5,513.32 4,711.6 1963 35,550.18(C) 6,838.47 - 42,388.65 8,756.79 6,343.42(C)(1,914.77) 17,014.98 25,373.67 1964 38, 414.50 e 38,414.50 5,641.45 6,554.61 - 12,196.06 26,218. 4% 1965 - (B) - 9,012.50 - 9,012.50 - 1,362.14 - 1,362.14 7,650. 36 Quick-copy department: 20% - (A): \ 1956 2,687.18 e « 2,687.18 2,179.99 101.44 - 2,281.43 405.75 1956 3,173.42 ° - 3,173.42 2,694.24 95.83 - 2,790.07 383.35 1957 1,372.00 - - 1,372.00 1,113.04 51.79 - 1,164.83 207.17 1958 2,856.74 ° - 2,856. 74 2,182.74 134.80 - b 539.20 F205, 126.61 $15,090.91 & 1,495.00 $ 253,400.10 . Declining balance method Additional first year depreciation taken R.A.R. adjustments $1, 761,833.10 $78,501.64 32,778.82 $1 807,555.92 116. BEST COPY AVAILABLE 85.614.8 Feen 1120 1% 4) 75 Pose 3 ~ “Schedule 1.—SPECIAL DEDUCTIONS _Gmall! business investment companics and member. of affiliated groups not filing a consolidated return—see instructions) 4. Dividends-received: (a) 85 percent of column 2, Schedule Co... 6. c cece cecceceeeuce seeeaed (b) 61.2 percent of column 3, Schedule C (ree instructions for trecal year) .. (c) 8S percent of div.tends receiv 3 from certain for.ign co.porations 2. Total dividends-received de tuctions (sur of lines ! Se | (b), and (>) but rot to exceea 39 percent of the excess of line aeeeeeet linutaton does not appiy to a year in which a net 28, page | over line 4 of this scheaule). (The SS, ctdcccccdessasacnnesawesuens 3. Dividends paid on certain preferred stock of public utilities ons instruct.ons in case ut net operaiing loss or fiscal year) 4. Western Hem. phere trade corporations (not allowable in year of net operating loss—see inst. for fiscal year). .... Enter here and on line 29'b), page | $. Total special deductions— Add lines 2. 3, and 4 —— ..50399.59.. 50,399.59 SCHEDULE J.—TAX COMPUTATION _(Component members of controlled corporate group use Form 3920 to compute your tax) 8. Taxable income (line 30, page 1).... i eee ik ies aaa aipeanain 2. If amount of line } is: (a) Not over $25,000—Enter 22 percent cf line | (b) Over $25,000—Enter 5° percentol line] .. Subtract $7,000 and enter difference 3. Income tax (line 2, or line 22 of separate Schedule D, whichever is lesser. or fiscal year tax computation) 4. Foreign tox credit (attach Form 1118)..... 6. Balance (line 3 less line 4)... 2.2.2... cece eee ec eee cuiintiehduiaeigeebbuiin Seaeadbeiadieetideaiiiainiidinineadanibed 6. Investment credit (attach Form 3468)... ........ 7. Balance of income tax (line 5 less line 6) a eee eee eee ee ee ee ee ee eee eee ee eee ee eee eee ee ee ee ee ee 8. Tax under section S41 of the Internal Revenue Code (trom Schedule 1120 PH). 9. Taz from recomputing prior year investment credit (attach statement)... 80. Total tax—Add lines 7. 8, and 9, Enter here and on line 31, page ! eee eee eee ee eee ee _7,000.00 201 5 90..22. 233° cs eee eee eee eee eee ee ee ee ee ee ee SCHEDULE FY _ (Fiscal year tax computation schedule for taxpayers with taxable income over $25,000) 1. Tasatle ; noome ane 30, page }) 2. 50 percent of line } Subtract $7,000 and enter omen 3. 48 percent of line 1 .... Subtract $€ 500 and enter ume 4 Amount on line 2 or alternative tax ‘serarate prior to January | Ss ™ 6. Amount on line 3 oF altesnutwe tax Ge; arcte S v) atter De. semper 21. 1964. diveded by the 'ctal numer of day 6. Income tax— Az? snd § ‘ “hei MrIe 34.0 0s 4 Enter fer and on! mult.t ne 2 Soh. Sche ite D) muitiphed by the number of days in the taxable A ceed .965. diwided ty the tctal number of days .n the taxable year hed by the number of ony in the taxable year in the tauable year tule | 78 80 int, root =o 8. Date incorporsted Lee Le. B. (1) Did the corporation at the eng cf the tan role yearown dh fectly or in tirectiy J percent or more of the v_'ing stock @ a domestic corporation? Yes ®) No()j nm wmdwidual mertre:shup, trust. or usso- ciation at the eri of the tazabie yerr own Girectiy of indirectiy 50 percent or more of the enrperation s voting stock? Yes) No W (For rules ot vttr b wan see section 267 jc).) lt the an: ver to “> or (2) is “Yes * attach separate schedule snowing (a) name afire's ard em: end a Percentage owned Wf the c ve is “Yes,” cation no; loyer dent M.D Ter claum a deducts . for expences connected owith A hunting lo Age [ } 1 workin 3 earch or form C). tishing camp (. fesort property _. F leasure boat or yacht (j ‘or other similar facility —7? (Other than where the operation cf the facility was the principal business) Yes [] No & (2) The lear.:.3, renting, or owner hip of a hotel room or suite "| of artment C1. or other dwelling [), which was used by customers or er euplezers or members of their tarmilies? (Cther than use by employees while in business travel status.) Yes) No® (3 The attendance of your employees’ families at con- vertions or business meetir gs? Yes) No (4) Vacations tor er, *yees or members of their farulies? ewer to (1) at inciude the income Other than amount reported on Form W-2) Yes for loss) trom — Jv page |. Ferm 1120 of such N é ate oan on aaa Gute Gen ‘ Gj No @ corporat on tort t le y una with or within + Rete oy em — o your Senate onan. Deas oar ens wh eae Principal business activity Office outfitters §. Did you have any centracts er subcontracts subject to the o. AD cena product o — i oes names Ae ; nm ere you @ mer cer of a controlled groum sunject to the pro- Reneg- rates Act of 1951 Yes () No B wessons G4 section 1561? Ves oO No cr section 1562? Uf Yes,” see inst K. Enter amourt here Yes &) Not) k.r ee a hetmantiands I so check he ot eianon Ap 1. parent subs: bary OS pou ot a tre Surg a ate ' “No & 2 brother : er(}: 3 cor.cinaton of (!) and (2) 5 ° any st--« ot @ t.re.aa corporation Yeu No section 1% 3) If “Yer.” attach stater. ww Ameont . ren Total 40's,114.09 «) Aro tng of taxable able year 176,084.24 674,774.73 5405 937.8) CRESS | a\o at ] 007,2!:9,28 a 9€37,099.52 “or! Towa! 319, 725s. 6 eret ie he 74, 084,23 “sia mks Ome eee eee ceweeeweeees eres h, 460,583.10 4430, 305.99 | Wok. 751. 320 ,035 on LSS 614.39 944 ,691,.09 301,250, 30.09 kT 250,.00 a 300 |__ 225 .50«, 33 oat, 692253 3.72 7,535.18 200s 036.9 460,409, 29 14g 1256 4 * 14,929.11 326, 753.71 318,099, 89 305,787.59 ~_ 290, 865.4 476,860.00 376,860,001 “376,860.60 376,860.00 | 56,193,644 56, 493,64 2,200 18) FURR ITEMIZED ENTRIES M MADE BELOW MUST BE IDENTIF ED BY ACCOUNT 1, Net income per books 2. Federal income taz...... sineriin ckeaee | 3. Excess of capital losses over capital gains. ... 4. Taxable income not recorded on books this yoar (temize) $. Fxpences recorded on books this year not de- ducted in this return (itemize)... CMCECSS...... Sk | 6. Teta! of lines 1 through §.............) 39 9345.16 9.27 =é 1A "101,08 -_——— ee Schedule M-1. RECONCILIATION or INCOME PER BOOKS WITH INCO- iE F PER RETURN a . 08 | 7. Income recorded en books this year not in- cluded in this return (itemize) 7v, PRA tae} - -ineu whe rance dn eaat. ‘ease..d5 - So¥e life excess..of............ 8. Deductions in this tax return not dame against book incon .Pric ne this year ( temize)_...... r..ears.state incame.. 9. 10. Income (ire 28. page 1)— Total of lines 7 and B.. line 6 less 9.... _ Schedule M-2. —ANALYSIS OF EARNED SURPLUS AND UNDIVIDED | PROFITS PER BOOKS = 23, page 4) 1. Po'lance at beginning of year 2. Net income per books. .... vesdonesousuéouen ee 3. Other increases (itemize)_.................. visiomidl ‘Total Hires I 2ond 3... | Pee oe ee 8. Dictrik ations: (a) Cash (b) St (c) Property . ee ee eee eee eee eee eee ee eee 6. Wher decreases (itemize). ........ 20.0... 77 rom ZBOSO (Rev. luly 1962) US. Treasury Department Internal Revenue Service STATEMENT Ii) SUPPORT DEDUCTIO. For Payments to an Employges’ Pension, rofit-Shazing, Stock Bonus Trust or Annuity Plan and Compensation Under a Deferred-Payment Plan Name and address Employer taxable year ended June 30, 1965 IVAN ALLEN COMPANY - ATLANTA, GEORGIA Employer identlication No. 58 0136820 PART I.—DEDUCTION CLAIMED UNDER SECTION 404(a)(1), (2), (3), or (7) 1. Nome ot plans ry : - Profit sharing pension plan of Ivan Allen Company and subsidiaries 2. Type of plan (C0 Pension or cnnuity G) Profit-sharing ([) Stock benus _ July 17,1956 %. U u sivorable determination letter has been received indicating that this plan qualifies under section 401 of the Code, give date of most recent determination letter 4. Medium of funding: (Check each applicable box) (a) Trusteed plan. CO Individual annuity contracts Individual contracts containing life insurance C) Self-administered (b) Nontrusteed plan: Group contract: OC) Deferred annuity () Group permanent (J Other (Specify) C) Deposit administration CD Individual annuity contracts See ee esee renee cecereeeeceeeseneeseses 8. Total number of employees as of the close of the year for each of the following groups based on reasonable estimates: (a) Employees ineligible because of requirements cs to: i) Temporary, seasonal, part-tirre..... ......-...-.-.-- —_— (iii)... (ii) Job classification and not included (v) Pneaeum ¢ pay y (Solely) . J Lee Te ews Hee (iii) ny gk « pote vanes not inatetes (b) Employees eligible for coverage but not covered by plan (c) Employees covered by plan (a) Total of all employees (lines (a) (vii), (b), and (c)) (Specify). = i (vi) Other and not included in (i) ona w (iv) Minimum age and not included in (i) through 146 349 (e) If you claim that the requirements of section 401 (a)(3)(A) are satislied, check here 89 and attach necessary data and computation to substantiate. “6. In the case ot (a) Trust—-Attech a detailed balence sheet and a detailed ! statement cf receipts and disbursements (b) Nontrusteed Annuity Plan—Attach a detailed statement including for each insurer (1) the name of the insurer, (2) the contributions paid by the employer, (3) the contributions paid by the employees, and (4) the amounts and kiads of premium refunds or similor credits made available and the disposition of such credits (ec) Pension or Annuity Plan—For each year a summary of the costs or hiabilines and adjustments under the plan based on the applica- tion of the methads, factors. and assump! cation of the reasonableness therec!. t. ( (a) ) Total nor deterred cor pe nsation pai do or r accrued {kc for. all employees u under the p plan. (b) Total nondeferred compens [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_0149%3A2. Public record. Not legal advice.