McLaughlin

This is an appeal from a judgment rendered against appellant for a refund of income taxes paid by appellee for the years 1927 and 1928, in the sum of $5,441.51. The question presented is whether a corporation organized under the laws of the state of Nevada, with principal place of business in the state of California, is entitled to deduct from its income tax returns for said years the net loss sustained within the preceding two years by a predecessor corporation having the same name and substantially the same capital structure, organized in accordance with a statute of the state of California authorizing corporations to be formed with par and non-par stock, which statute was subsequently held to be unconstitutional, and thereafter corporations so organized deemed to be de facto corporations only subject to proceedings for dissolution.

The Commissioner disallowed the deductions on the ground that the losses were sustained by a different taxable entity, and therefore were not deductible. The contention of appellee, sustained by the court below, is that the two corporations, though nominally distinct, were in substance and effect identical. The case was tried on stipulated facts.…