Wilson Bros. & Co. v. Commissioner

These are consolidated cases, pending upon petitions to review decisions of the Board of Tax Appeals upholding the Commissioner’s determination of deficiencies in petitioner’s income taxes for the years 1932, 1933 and 1934.

1. The first question raised is whether there is evidence to sustain the Board’s finding that petitioner was availed of to avoid the imposition of surtaxes. The pertinent statutes, § 104, Revenue Act of 1932, 26 U.S.C.A. Int.Rev.Acts, page 508; § 102, Revenue Act of 1934, 26 U.S.C.A. Int. Rev.Acts, page 690, provide that if a corporation is formed or availed of for the purpose of preventing the imposition of the surtax upon its shareholders, through the medium of permitting its gains and profits -to accumulate instead of being distributed, it shall be subject to an additional tax at specified rates. If the corporation is a mere holding or investment corporation, or if its-gains or profits are permitted to accumulate beyond the reasonable needs of the business, either fact, says the statute, shall be prima facie evidence of the purpose to avoid the-tax.

Petitioner is a family corporation controlled by the brothers F. A. and W. T. Wilson. Prior to the…