Carling Tool & Machine Co. v. Commissioner , 2 B.T.A. 980 ( 1925 )

APPEAL OF CARLING TOOL & MACHINE CO.

Carling Tool & Machine Co. v. Commissioner

Docket No. 3639.

United States Board of Tax Appeals

2 B.T.A. 980; 1925 BTA LEXIS 2194;

October 26, 1925, Decided Submitted June 29, 1925.

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Charles A. Pease, C.P.A., for the taxpayer.

George G. Witter, Esq., for the Commissioner.

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Before JAMES, LITTLETON, and SMITH.

This is an appeal from the determination of a deficiency in income and profits tax for the calendar year 1920 in the amount of $552.06. The total tax is not in controversy but only so much thereof as arises from the disallowance by the Commissioner of additional salaries paid to the officers of the taxpayer for the year 1920, aggregating $2,000. The disallowance by the Commissioner is based upon the ground that the additional compensation was not determined and that no liability was incurred by the taxpayer therefor during the taxable year 1920.

FINDINGS OF FACT.

The taxpayer is a Connecticut corporation with its principal office and place of business at Hartford.

The corporation was organized in 1920, at which time the compensation of its four officers, who owned the entire capital stock, was fixed by them at 85 cents an hour. At that time it was understood by the officers that they should draw a reasonable additional compensation for the year provided the earnings of the corporation warranted. In March, 1921, the officers and directors of the taxpayer had the books of the corporation audited and determined upon the amount of $500 each as additional compensation for its four officers for the calendar year 1920. A resolution adopted at that time authorized the payment thereof. Accordingly, the amount of $2,000 was charged as an expense upon the books as of December 31, 1920.

DECISION.

The determination of the Commissioner is approved.