Artesian Water Co. v. Commissioner of Internal Revenue

. Appeal from a decision of the United States Board of Tax Appeals sustaining the determination of the Commissioner of Internal Revenue that the petitioner, to whom we shall refer as taxpayer, is subject to the undistributed profits tax imposed by the Revenue Act of 1936, Section 14, c. 690, 49 Stat. 1648 , 26 U.S.C.A. Int. Rev.Acts, page 824, for not having distributed its income to its stockholders in the calendar year 1937. The correctness of this determination is the sole question involved in this appeal.

In resisting the tax, the taxpayer relies upon Section 14(d) (2), exempting from payment of the tax “Domestic corporations which for any portion of the taxable year are in bankruptcy under the laws of the United States, or are insolvent and in receivership in any court of the United States or of any State, Territory, or the District of Columbia.” (Emphasis supplied.)

Briefly stated, the facts are: The taxpayer, a California corporation, was the owner of certain real property, and certain oil leases. From the income producing standpoint an oil lease, which is referred to in the record as the Shell Oil lease, which yielded more than 90 percent of all taxpayer’s income during…