Commissioner of Internal Revenue v. Pacific Affiliate, Inc., a Corporation, Pacific Affiliate, Inc., a Corporation v. Commissioner of Internal Revenue

This is an appeal from a decision of the Tax Court, 18 T.C. 1175 , in a case involving the excess profits tax statute. The Court sustained certain of the Commissioner’s deficiency assessments and overruled others. Both the taxpayer and the Commissioner have appealed.

The decision below was by the full membership of the Court and was without dissent except as to one relatively minor matter. It represents a well-considered effort to resolve points all of which are debatable. We are not persuaded that the Court was wrong in any particular.

One matter, however, should be noticed specifically. A question ruled on by the Court was whether the Commissioner erred in reducing invested capital, as of the beginning of 1944, by the amount of income and excess profits tax deficiencies determined therein for the year 1943. The Court in upholding the Commissioner in this respect adhered to its earlier ruling in Stern Brothers & Co., 16 T.C. 295 . It is suggested that doubt may be cast on the validity of that ruling by the recent decision in Lewyt Corporation v. Commissioner, 349 U.S. 237 , 75 S.Ct. 736 , handed down May 23, 1955.

In Stern Brothers & Co. the Tax Court recognized and considered…