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STENTON GARDENS v. COMMONWEALTH PENNSYLVANIA (02/04/74)

decided: February 4, 1974.

STENTON GARDENS, INC., APPELLANT,
v.
COMMONWEALTH OF PENNSYLVANIA, BOARD OF FINANCE AND REVENUE, APPELLEE



Appeals from the Orders of the Board of Finance and Revenue in cases of Petitions of Stenton Gardens, Inc., Docket Nos. 25483 and 25981.

COUNSEL

A. Victor Meitner, Jr., with him Lloyd A. Good, Jr., and Randal J. McDowell, for appellant.

M. David Smeltz, Deputy Attorney General, with him Edward T. Baker, Deputy Attorney General, for appellee.

Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. President Judge Bowman did not participate. Opinion by Judge Rogers.

Author: Rogers

[ 12 Pa. Commw. Page 466]

Stenton Gardens, Inc. (Stenton) has appealed from decisions of the Board of Finance and Revenue (Board), upholding determinations of the Department of Revenue of Stenton's capital stock tax liability for the periods ending June 30, 1970 and December 16, 1970. The parties have entered into a stipulation of facts, upon the basis of which we make the following

Findings of Fact

1. Stenton was incorporated in Pennsylvania on August 28, 1942, with an authorized capital stock of 640 shares, par value $50.00 per share. The stated purpose was to "purchase or otherwise acquire, hold, lay out, develop, manage, sell, exchange, mortgage, pledge, lease and otherwise deal in real property. . . ."

[ 12 Pa. Commw. Page 4672]

. From the date of its incorporation until the death of Carl Metz on January 15, 1963, Stenton was owned, controlled, and operated by Carl Metz as a building corporation. Carl Metz owned directly or through nominees 560 shares, and his wife, Helen C. Metz, owned 80 shares.

3. On January 15, 1963, Stenton was actively engaged in the erection in Roxborough, Pennsylvania, of a group of duplex homes and row houses, owned certain real estate in New Jersey, owned a gas station in Cheltenham, Pennsylvania, and held other real estate.

4. The principal activity of Stenton after the death of Carl Metz was the completion of the duplex units and row homes in Roxborough, Pennsylvania.

5. After the completion of the Roxborough dwellings, Stenton was no longer active in the building business, but acted solely as a real estate holding company through the executors of the estate of Carl Metz, deceased. The executors through Carmet Realty, a real estate brokerage firm, collected the net rents from the Roxborough homes and gas station. The duplex homes and row houses were managed by Carmet Realty.

6. At a special meeting of the shareholders of Stenton on December 17, 1969, the executors and Helen C. Metz adopted a complete plan of liquidation and dissolution.

7. For the year ending June 30, 1969, Stenton in reporting its capital stock tax submitted a valuation of $60,000 and a taxable value of its capital stock of $58,248, which valuation was approved by the taxing authorities on January 16, 1970. Thereafter, within the time permitted by law, the tax authorities on February 5 & 16, 1971, resettled Stenton's capital stock tax for the year ended June 30, 1969, pursuant to Section 1105 of the Fiscal Code, placing a valuation of $200,000 on Stenton's capital stock and a taxable value of $194,158.00.

[ 12 Pa. Commw. Page 468]

This resettled valuation was accepted by Stenton for the year ended June 30, 1969.

8. At the time the taxing authorities resettled Stenton's capital stock tax for the year ended June 30, 1969, said authorities had notice of the liquidation of Stenton and the fact that substantial sums had been paid to its stockholders.

9. Stenton, in reporting its capital stock tax for year ended June 30, 1970 submitted a valuation of $130,000 and tax due of $910.00. On February 5 & 16, 1971 the taxing authorities settled a value of capital stock at $200,000 with a tax due of $1400. Thereafter, on June 24 & 25, 1971 and in the time permitted by law, the taxing authorities resettled Stenton's capital stock tax for year ended June 30, 1970 pursuant to Section 1105 of the Fiscal Code placing a valuation of $700,000 on Stenton's capital stock and tax due of $4900.

10. From December 17, 1969, until December 16, 1970, the only activity of Stenton was the sale of all its duplexes, row houses, and gas station to the public in an effort to completely wind up the affairs of Stenton. During this period, Stenton sold its gas station and row houses and periodically made distributions in liquidation to its stockholders in cash and in kind.

11. For the year ended June 30, 1970, Stenton reported a book net worth or book equity of $7305. The taxing authorities revised Stenton's book net worth or book equity for the year ended June 30, 1970 to $755,381. This revision was based upon the book equity reported plus including gain from sale of assets in subsequent short period and excess of market value of property distributed in kind over book ...


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