Cincinnati, F. & F. W. R. Co. v. Commissioner

APPEAL OF CINCINNATI, FINDLAY & FT. WAYNE RAILWAY CO., J. B. CAROTHERS, RECEIVER. Cincinnati, F. & F. W. R. Co. v. Commissioner Docket No. 4886. United States Board of Tax Appeals 5 B.T.A. 108; 1926 BTA LEXIS 2948; October 20, 1926, Decided *2948 Leo B. Kagan, Esq., for the petitioner. Percy S. Crewe, Esq., for the Commissioner. PHILLIPS *108 PHILLIPS: This is an appeal from the determination of a deficiency in income tax, in the amount of $1,597.39, for the calendar year 1922. The only question involved is whether the amount of $18,000, paid by the United States Railroad Administration to the taxpayer in *109 1922, constitutes taxable income to it in that year, as contended by the Commissioner. The facts are admitted, and the admissions are copied verbatim. FINDINGS OF FACT. J. B. Carothers was appointed receiver of the Cincinnati, Findlay & Ft. Wayne Railway Co. on March 15, 1917. From March 15, 1918, to August 31, 1918, the railroad was under Federal control and was operated by the United States Railroad Administration, and during that period all of its accounts were handled by the Nickel Plate Railroad. On the latter date, operation of the railroad was discontinued and it has not been operated since that date. On November 18, 1918, the property of the company was sold under foreclosure proceedings and the sale was confirmed on November 19, 1918, by order of the United*2949 States District Court for the Western Division of the Southern District of Ohio. In June, 1922, the United States Railroad Administration paid to the receiver the sum of $18,000 for the possession, use, and occupation of the property of the railway company for the period in 1918 that it was under Federal control. The return of the taxpayer for the taxable year 1918 showed a deficit of $23,730.99. For the year 1922 the receiver filed an income-tax return on behalf of the railway company, showing a deficit of $1,322.82. On auditing the return the Commissioner, by adding the amount of $18,000, above mentioned, to the income reported, found a net income for the year of $16,677.18, and computed thereon the tax involved in this appeal. The books of the railway company were kept on an accrual basis, as required by the Interstate Commerce Commission. There is no deficiency for 1922, and an order will be entered accordingly. Appeal of Illinois Terminal Co., 5 B.T.A. 15. MARQUETTE, SMITH, AND STERNHAGEN dissent.