Commissioner v. Death Valley R.

This is a petition by the Commissioner to review the action of the Board of Tax Appeals in reference to the claim of respondent, Death Valley Railroad Company, for a deduction of its losses during the fiscal year ending September 30, 1921, from its net income for the calendar year beginning January 1, 1923.

The Board of Tax Appeals found that the loss of the respondent for the fiscal year beginning September 30,1920, and ending September 30,1921, was $21,594.68, that the proportion of this loss for the nine months of the fiscal year (January 1, 1921, to September 30, 1921) included in the calendar year beginning January 1, 1921, and ending December 31,1921, was $16,196.01. This amount is conceded to be correct if the theory of the Board of Tax Appeals is sustained. The Board allowed this: deduction from the gross income of the respondent for the calendar year 1923.

The difficulty in the case arises from the fact that the respondent had always reported its income on the calendar year basis, but, by reason of its affiliation with the parent corporation, the Borax Consolidated, limited, and with other subsidiary companies, the Commissioner computed the taxes of the affiliated…