Guaranty Trust Co. v. United States

The Guaranty Trust Company sued as liquidating trustee of Yakima Holding’ Corporation to recover the amount of a deficiency assessment collected from the latter on its 1935 income. The theory of the suit was that the income for which the deficiency was assessed was not that of the Holding Corporation but was the income of another, namely of the Yakima First National Bank. The Bank reported the income in its return for 1935, but paid no tax thereon because it suffered in that year a net operating loss.

Two transactions are involved. In respect of the first the finding below was against the taxpayer, but as to the second the holding was in its favor. Both parties have appealed. The facts are stated in the opinion of the trial court, officially reported in 44 F.Supp. 417 , and need not again be recited in detail.

During 1934 and 1935 the Yakima Holding Corporation owned the stock of the Guaranty Trust Company and of the Yakima First National Bank, all three of which institutions were dominated by a small group of men. The Bank was in -a shaky condition financially and examiners were insisting that the condition be remedied. The men in control were interested in the Sunshine Mining…