The opinion of the court was delivered by: MARSH
The defendant, John H. Bingler, District Director of Internal Revenue, disallowed plaintiff's claims for refund of income taxes paid for years 1955 and 1956 in amounts of $ 6,330.23 and $ 12,959.32, respectively. In the present litigation the principal issue presented is whether the plaintiff taxpayer, Troop Water Heater Company (Troop), was entitled to a bad debt deduction claimed by its Receiver, also a plaintiff, in its 1957 income tax return.
Dependent upon the decision of this issue is whether Troop sustained a net operating loss in 1957 which may be carried back to the years 1955 and 1956 and carried forward to the years 1958, 1959, and 1960.
We think Troop was entitled to a bad debt deduction of $ 178,968.97 for 1957 and sustained a net operating loss of $ 101,242.40, which is available for use pursuant to § 172, 26 U.S.C.
The stipulated facts are so found. Other facts are found from the evidence presented.
The plaintiff taxpayer, Troop, is a Pennsylvania corporation having its principal place of business in Pittsburgh, Pennsylvania. It was engaged in manufacturing water heaters and tanks. At all times pertinent, its principal officers and directors were John Murray, treasurer, and Frank Proctor, president. From November, 1956 through May, 1957, Troop advanced money to Alabama Acceptance Corporation (Alabama), its parent corporation.
Alabama was an Alabama corporation having its principal place of business in Birmingham, Alabama. It was a loan discount company engaged in borrowing and loaning money to individuals on automobile paper. Alabama ceased making loans to individuals after November, 1957. It continued to borrow money until November, 1957. Partial repayments of borrowed funds were made up to November, 1957.
At all pertinent times, Alabama owned 81% Of the stock of Troop. The remainder of Troop's common stock was owned by 35 individuals; six individuals owned its outstanding preferred stock of 310 shares.
At all pertinent times, Alabama's principal officers and directors were John Murray, president, and Frank Proctor, vice-president.
Alabama was adjudicated a bankrupt on May 9, 1958. At that time it had liabilities of $ 1,100,162.03; its Trustee, as of December, 1963, had collected $ 20,492.45. Troop filed a claim against Alabama with the Referee in Bankruptcy for unpaid loans, which claim was marked unsecured and contested; it has not received any payments from Alabama's Trustee in Bankruptcy.
The plaintiff, Bernard J. Hampsey, was appointed permanent Receiver of the taxpayer by the Court of Common Pleas of Allegheny County, Pennsylvania, on August 11, 1958, and is presently acting in that capacity.
The defendant, John H. Bingler, since May 1, 1956, has been the District Director of Internal Revenue at Pittsburgh, and is the agent of the Commissioner of Internal Revenue.
Troop paid income taxes for 1955 in the sum of $ 6,330.23, and for 1956 in the sum of $ 12,959.32, to the defendant, and has duly filed claims for refund based on the alleged net operating loss carrybacks from the year 1957. The defendant disallowed the claims for refund. Troop timely filed this action to recover the income taxes paid by it to defendant in 1955 and 1956.
The income taxes for 1955 were paid by two checks, i.e., one for $ 1,500.00 dated March 14, 1956, and the second for $ 4,830.23 dated June 7, 1956. The first check was received by the defendant's predecessor on March 15, 1956, but was deposited by the defendant, Bingler, on June 8, 1956, along with the second check, making a total deposit to the defendant's credit of $ 6,330.23, the income tax of Troop for 1955 as computed in its return for that year.
Defendant has assessed income, excise, unemployment, and Federal Insurance Contributions Act taxes, penalty and interest, against the taxpayer for the years 1957, 1958, 1959, and 1960. All of these taxes were duly and timely assessed, notice and demand for the payment was then, there, and thereafter made, and was refused by the plaintiffs and these taxes remain unpaid. The amounts are set forth in Appendix A. These assessments are ...