Basalt Rock Co., Inc. v. Commissioner of Internal Revenue

Here for review is a decision of the Tax Court ( 10 T.C. 600 ) holding that there was a deficiency of $355,342.21 in respect of petitioner’s excess profits tax for 1942 — a decision from which five judges of the Tax Court dissented. Petitioner contends that, instead of a deficiency of $355,342.21, there was an overpayment of $935,575.38. The question presented is whether petitioner’s excess profits tax for 1942 was correctly computed by the Tax Court.

Petitioner’s excess profits tax for 1942 was a tax equal to whichever of the following amounts was the lesser: (A) 90% of petitioner’s adjusted excess profits net income for 1942, or (B) an amount which, when added to petitioner’s income tax (normal and surtax) for 1942, equaled 80% of petitioner’s corporation surtax net income for 1942, computed under 26 U.S.C.A. Int.Rev. Code, § 15-, but without regard to the credit provided in 26 U.S.C.A.Int.Rev. Code, § 26(e). See 26 U.S.C.A.Int.Rev. Code, § 710(a). Both amounts, therefore, had to be computed in computing petitioner-er’s excess profits tax for 1942.

Petitioner and respondent agree that amount A — the amount mentioned in § 710 (a) (1) (A) — was correctly computed by the Tax…