Updike v. Commissioner

NELSON B. UPDIKE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Updike v. Commissioner Docket No. 42404. United States Board of Tax Appeals 22 B.T.A. 12; 1931 BTA LEXIS 2185; February 2, 1931, Promulgated *2185 Richard S. Doyle, Esq., and Alfred G. Ellick, Esq., for the petitioner. F. R. Shearer, Esq., and E. L. Corbin, Esq., for the respondent. STERNHAGEN *12 The respondent determined a deficiency in the petitioner's income tax for 1924 of $41,583.21, resulting from six adjustments in items of gross income and deductions. The petitioner assails but one of these adjustments - the increase of his gross income by $126,637.74 of unreported profits in respect of transactions on the Chicago Board of Trade alleged by petitioner to have inured to a corporation and not to him. FINDINGS OF FACT. The petitioner is a member of the Chicago Board of Trade and has for a long period traded in grain. He is interested in several corporation *13 engaged in different lines of business, the principal one of which was engaged in the grain business. His individual operations in the grain market were conducted through this corporation. Petitioner was in 1924 the sole stockholder of the Bee Publishing Company, which published newspapers in Omaha. This company in June, 1924, had been sustaining losses. It then began to engage in trading in grain futures. *2186 The transactions on the Chicago Board of Trade were conducted by and in the name of petitioner who, as a member of the Board of Trade, was required to pay a smaller commission on each trade than a nonmember. Petitioner had some doubt whether the Bee Corporation was entitled to the advantage of the reduced commission and therefore adopted a system of records and accounts which would entirely conceal the Bee Corporation in investigations by the Board of Trade. He used his own symbol in making trades and keeping his trading accounts. But he indentified the Bee transactions by a further symbol known only within his own organization. The profits from these trades for the Bee Corporation in 1924 were more than $126,637.74. The Bee Corporation at various times received credits and cash on account of these profits and included the full amount as income on its tax return. The Commissioner found that the trasactions were in the name of petitioner, held the profits to be his, and increased his net income by including this amount of $126,637.74 in his gross. OPINION. STERNHAGEN: The only question is whether the evidence establishes that the transactions from which the $126,637.74*2187 were derived were really those of the Bee Publishing Company, as petitioner contends, or of the petitioner, as respondent contends, We think it substantiates the view that the profits were those of the Publishing Company, and should be excluded from the gross income of petitioner. Judgment will be entered under Rule 50.