Ebling Co. v. Graves

Schenck, J. This is a proceeding under article 78 of the Civil Practice Act to review a determination of the State Tax Commission confirming a corporation franchise tax assessed under article 9-A of the Tax Law and measured by petitioner’s net income for the calendar year 1930. The dispute arises because petitioner attempted to deduct from its 1930 income for New York State tax purposes receipts of installments upon the price of certain real estate which it had sold prior to 1930. Petitioner had been a real estate corporation and had been taxed under section 182 of the Tax Law, the tax being based upon the net value of petitioner’s capital stock. The petitioner reported the full amount of 1930 cash receipts, including installment payments, in its Federal income tax return, but claims the installment receipts need not be included in its income base for State tax purposes. The petitioner’s contention cannot be sustained. The full receipts of 1930 should have been included in the tax base for assessment against the petitioner under article 9-A. The question of the 1930 income of the petitioner corporation should be determined in the same manner in respect to New York State as it was determined in respect to the establishment of a base for Federal income taxation. The argument of petitioner that this amounts to double taxation by the State is without merit. Prior to 1930 the tax was not based upon income, but was based upon valuation of capital stock. The petitioner corporation may have been within its rights in having moneys that would not be received until 1930 reflected in the value of its capital stock. However, it certainly cannot use such basis of computation to exempt itself from paying a tax based upon the income received by the corporation in 1930, the year in which the moneys involved were actually received by it and obviously constituted part of its income for that year. If the petitioner had been subject to taxation under article 9-A in the year in which it sold the real estate the installments of the price for which were received in 1930 and had included these future payments in its net income during those years, it would not, of course, bé compelled to again include the receipts in its 1930 income report. The situation, however, is clearly distinguished where the petitioner paid' a franchise tax in the previous years under section 182 of the Tax Law, which is not based upon income. In People ex rel. Conway Co. v. Lynch (258 N. Y. 245) it was held that “ net income ” for tax base purposes is the same as applied to New York State as to the Federal government. In accordance with this more or less obvious' rule the inclusion of the disputed installment payments in petitioner’s 1930 Federal income tax return precludes the deduction of this amount from its computation of 1930 income for State tax purposes. [429] The determination of the State Tax Commission should be confirmed, with fifty dollars costs and disbursements. Crapser, Bliss and Heffernan, JJ., concur; Hill, P. J., dissents, in opinion.