Peerless Inv. Co. v. Commissioner

The petitioner herein seeks a review of a decision of the United States Board of Tax Appeals finding a deficiency in petitioner’s 1929 income tax of $2,728.92 and denying his claim for refund of $5,688.91, the tax already paid for the year in question.

In 1928 one William L. James, acting on behalf of the Pacific Stages Company, an Oregon corporation, and on behalf of all its stockholders, of which he was one, sold to the Southern Pacific Motor Transport Company, a competitor, an option to purchase the entire stock of Pacific Stages. The consideration for the sale was to be the sum resulting from an appraisal of all the assets of Pacific Stages at the time of the sale, plus one-half the profits of its operations for three years thereafter.

In October, 1928, a supplemental agreement was concluded between James and the Transport Company whereby it was provided that the latter should have the privilege of paying the sum of $90,000 in lieu of one-half the profits for three years.

In December, 1928, the Transport Company exercised its option to purchase. The immediate consideration, based on appraisal of the assets of Pacific Stages, was $116,-487.54. Of this sum the Transport…