Haight

This is an appeal from a judgment denying the recovery by plaintiff of certain income taxes paid by George B. Hall and his wife for the years 1918 and 1919. The Halls are bankrupts, and plaintiff, having qualified as trustee of the estate on May 20, 1925, sues in that capacity. The amounts in controversy were paid by the Halls as a result of their having included in their returns of income their ratable shares of the undistributed profits of the G. Batcheller Hall Company, a corporation, of which they were stockholders. This was done upon the assumption that this company was. what is recognized in section 218(e) of the Revenue Act of 1918, as a personal service corporation, which for taxation purposes is treated as a partnership. 40 Stat. 1070 (Comp. St. § 6330⅛i). This mode of treatment, it may be observed, ceased on December 31, 1921. Section 218d, 42 Stat. 245 (Comp. St. § 6336⅛i). The 1918 taxes were paid by the Halls on December 15, 1919, and payment for 1919 was made in four equal installments, namely, on the 15th day of March, June, and September, 1920, and February, 1921.

In the spring of 1924 the Commissioner of Internal Revenue held the Hall Company was not a personal…