Palomas Land & Cattle Co. v. Commissioner

Petitioner, a corporation, seeks reversal of a decision of the Board of Tax Appeals which sustained a determination by respondent, the Commissioner of Internal Revenue, that there was a deficiency of $15,474.48 in respect of the income tax which respondent claimed was payable by petitioner “for the eleven months fiscal period ended November 30, 1928.” The facts are not in dispute. As stipulated by the parties and found by the Board, they are as follows:

Petitioner, in 1915, purchased all the capital stock of Grand Canyon Cattle Company, a corporation (hereafter called Canyon), for $200,000, and was the owner and holder thereof until November 30, 1928, 1 on which date petitioner received from Canyon a distribution, in partial liquidation, of $50,000, thereby reducing the cost basis of the stock to $150,000. Thereafter, on November 30, 1928, petitioner sold all its Canyon stock to third parties for $20,000, thereby sustaining a net loss of $130,000.

In the period January 1, 1928, to November 30, 1928, during which petitioner and Canyon were affiliated, their consolidated net income was $130,997.59, of which $128,-953.04 was the net income of petitioner and $2,044.55 was the net…