Security Co. v. Commissioner of Internal Revenue

Petitioner has petitioned this court to review a decision of the Board of Tax Appeals which sustained a deficiency determination of the Commissioner for the years 1927 and 1928, in the amounts of $93,353.10, and $106,111.80.

Petitioner was a corporate affiliate of the Security Trust & Savings Bank, hereinafter referred to as the Bank, throughout the years 1927 and 1928, and consolidated income tax returns were filed for those years, and were accepted by respondent.

Petitioner was organized in 1922 pursuant to a certain trust agreement signed by the Bank, its stockholders, and certain trustees, by which the stockholders of the Bank agreed that, if the Bank declared a special dividend for that purpose, that dividend should be paid to the trustees instead of to the stockholders of the Bank, and the trustees agreed to organize a corporation and apply the dividends to payment of the capital and surplus of the new corporation and to hold the stock of the new corporation 1hus paid for upon trust.

The trust agreement provided that each stockholder of the Bank subscribing to the agreement should become entitled lo a beneficial interest in all stock of the new corporation ratably, in…