Garrison Bros. State Bank v. Commissioner

The petitioner disposed of its business and good will to a new bank, called the Bank of Sumas, organized for that purpose. The appellee determined that it made a profit of $8,-614 on the transfer, which amount was taxable income, being net profits from the sale of its banking business. The commissioner claimed that for the consideration of $40,000 paid by the newly organized bank, $10,000 of which was paid to Loomis and Brygger, the petitioner transferred assets of the net worth of $31,386, leaving a profit of $8,614. Petitioner’s building was transferred at a value of $6,000, and its furniture and fixtures at $2,-000, while the depreciated cost of these assets was $9,386, resulting in a loss of $1,386 from the transfer of these assets. After deducting this $1,386 from the $10,000, the commissioner held the balance of $8,614 to be taxable income. The petitioner claims, however, that the $10,000 belonged to Loomis and Brygger, its sole stockholders, and was paid to them for their services in promoting the exchange. The controversy in the ease depends upon the question of whether or not $10,000 was income to the petitioner, or belonged to Messrs. Loomis and Brygger, to whom it was…