The opinion of the court was delivered by: MCVICAR
This is an action in assumpsit to recover $84,573.39 with interest, being the amount of the tax which plaintiff alleges the defendant, the collector of internal revenue, collected from the plaintiff for its taxable year ending June 30, 1918, which the Commissioner of Internal Revenue refused to refund. Jury trial was waived. The court makes the following findings of fact and conclusion of law:
1. National Casket Company, Inc., the plaintiff, is, and at all times hereinafter mentioned was, a corporation duly organized and existing under the laws of the state of New York with an office and place of business at Pittsburgh, Pa.
2. D. B. Heiner, the defendant, is and from on or about the 1st day of August, 1921, has been the duly commissioned, qualified, and acting collector of internal revenue in and for the Twenty-Third District of Pennsylvania, and now resides in the borough of Kittanning and within the said Western District.
3. Pursuant to the requirements of the Revenue Act of 1918 (40 Stat. 1057), plaintiff duly filed its income and profits tax return for its taxable year ended June 30, 1918, with the then United States collector of internal revenue at Pittsburgh, Pa., on or about April 4, 1919, and paid to the then United States collector of internal revenue an income and profits tax of $372,652.01. None of said tax is sought to be recovered in this suit.
4. Thereafter, the Commissioner of Interal Revenue caused an examination to be made of plaintiff's said income tax return together with its books and records, and assessed against plaintiff an additional tax of $85,861.24, which said additional tax plaintiff paid to the defendant on July 16, 1926.
5. No part of the aforesaid tax, except the sum of $287.85, has been refunded or repaid to plaintiff to date.
6. On May 14, 1930, plaintiff filed with the defendant a claim for the refund of $85,861.24 and alleged as a ground of said claim that upon the organization of plaintiff there was paid into it for capital stock of $1,500,000 in the year 1890, good will which had a value of $1,500,000, and that none of this had been included in the invested capital of plaintiff, although it should be included therein. A true copy of the said claim for refund is attached to the statement of claim. The claim was confined to a valuation of good will.
8. Prior to the enactment of the Revenue Act of 1926 (44 Stat. 9), the plaintiff appealed to the United States Board of Tax Appeals from the determination of the Commissioner of Internal Revenue that an additional tax of $85,861.24 was due from it for the fiscal year ended June 30, 1918. A hearing was held on said case before the United States Board of Tax Appeals on October 26, 1925, and on February 19, 1926, the United States Board of Tax Appeals rendered its decision which held that the good will of the plaintiff was valuable at the time it was paid into the plaintiff for its stock and also held that the evidence before the board was insufficient to enable the board to determine what such value was.
9. Plaintiff is a New York corporation, organized in the year 1890 with a capital stock of $3,000,000, divided into 30,000 shares of a par value of $100 each. The taxpayer was organized for the purpose of taking over the business of three corporations, to wit, the Stein Manufacturing Company, the Hamilton, Lemmon, Arnold Company, and the Chappel, Chase, Maxwell Company. Of the total capital stock, $1,500,000 was issued for tangible assets, consisting of the buildings, land, machinery, and equipment and cash of the three corporations. Each of the said corporations transferred tangible assets of the value of $500,000, for which each received $500,000 in stock. The value of the tangible assets was ascertained by a joint committee, which carefully appraised the property. In case the tangible assets lacked the value of $500,000, cash was contributed to make up the difference. The Stein Manufacturing Company contributed approximately $100,000 in cash to make up this difference in tangible assets. In addition to the $1,500,000 stock issued for tangible assets, $1,500,000 in stock was issued for the intangible assets consisting of good will, $500,000 being issued to each company. The three corporations at the time of the consolidation were the three leading manufacturers and sellers of caskets in the United States and were competitors in the same territory. The organization of the taxpayer was the culmination of numerous negotiations and conferences at arms length.
10. The Stein Manufacturing Company was located at Rochester, N.Y. Its specialty was the manufacture and sale of cloth-covered caskets. It had valuable patents on casket lids and metal linings for caskets. It market embraced all the territory east of the Mississippi River. It had been a profitable going concern for over fifteen years. Its net earnings for the period immediately preceding 1890 were as follows:
1886 $ 66,963.00
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