Highland Amusement Co. v. Commissioner , 3 B.T.A. 534 ( 1926 )

APPEAL OF HIGHLAND AMUSEMENT CO.

Highland Amusement Co. v. Commissioner

Docket No. 5316.

United States Board of Tax Appeals

3 B.T.A. 534; 1926 BTA LEXIS 2638;

January 30, 1926, Decided Submitted December 3, 1925.

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Benjamin H. McKindless, Esq., for the taxpayer.

F. O. Graves, Esq., for the Commissioner.

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Before PHILLIPS and TRAMMELL.

Taxpayer appeals from the determination of deficiencies in income and profits taxes for the years 1919, 1920, and 1921, in the sum of $2,644.03, arising, in part, from the disallowance by the Commissioner of the total amount claimed by the taxpayer as deductions for payments of salaries to its four officers for services performed.

FINDINGS OF FACT.

The taxpayer is a Maryland corporation, with its office at Baltimore, and during the years in question was engaged in the operation of a vaudeville and moving-picture theatre in Baltimore. It had capital stock of 400 shares, held equally by four individuals, who were also officers and directors of the taxpayer. During the years in question each of such persons was active in the conduct of the theatre and rendered services in connection with its operation and management which required him to devote an average of from three to five hours each day to this work. In 1921 one of such officers and stockholders died, whereupon the work about the theatre was reassigned in order to provide employment for his widow, who thereafter rendered services to the taxpayer daily. Each of such persons was paid $25 per week, and during each of the years in question taxpayer paid to such officers and stockholders $5,200. The services performed by such stockholders were necessary to the efficient operation of the theatre and the amounts paid were reasonable compensation for the services rendered.

DECISION.

The deficiencies, if any, should be computed by allowing as deductions, in each of the years involved, $5,200 as compensation for services rendered taxpayer by its officers and stockholders. Final determination will be settled on 10 days' notice, under Rule 50.