Tumwater Lumber Mills Co. v. Commissioner of Internal Revenue

Petitioner seeks review of a decision of the Board of Tax Appeals affirming the determination of the Commissioner of a deficiency in its income tax for 1925. The alleged deficiency results from the Commissioner’s disallowance of an item of $21,225 paid by petitioner to its stockholder-employees as a bonus and deducted as an expense of its business under section 234 of the Revenue Act of 1926.

The sole issue before the Board was the factual question whether or not this was “a reasonable allowance for salary or other compensation for personal services actually rendered.”

The Board’s decision on such a question of fact must stand unless it is clearly contrary to the evidence. See American Savings Bank & Trust Co. v. Burnet, 45 F.(2d) 548 (C. C. A. 9, 1930); Simons Brick Co. v. Commissioner, 45 F.(2d) 57 (C. C. A. 9, 1930); Atlas Plaster & Fuel Co. v. Commissioner, 55 F.(2d) 802 (C. C. A. 6, 1932).

The evidence is not in dispute. We state it briefly. Petitioner, a family corporation whose stock has been held since 1920 in equal shares by the six Anderson brothers, was organized by three of them in 1919. In 1925 the company was engaged in the manufacturing of lumber, in logging,…