Rogan

This is an appeal- from a judgment of the district court awarding Walter Wanger Pictures, Inc., a corporation, appellee taxpayer, a refund of taxes for the tax years 1936 and 1937.

The taxpayer reported a net income for 1936 of $92,040.30 and a tax due thereon of $21,546.86; and a net income for 1937 of $78,053.35 and the tax due thereon of $24,386.60. Thereafter additional taxes for 1936 were assessed and paid in the amount of $17,296.81, and an overassessment was determined for 1937 in the amount of $3,148.59. In making both computations the Commissioner refused to allow certain credits which the taxpayer claimed it was entitled to under Section 26(c) (2) of the Revenue Act of 1936, 26 U.S.C.A. Int.Rev.Acts, page 836, and its claims for refunds which were based on the denial of such credits were rejected.

In this connection the district court found that the taxpayer was required to, and actually did, pay $82,522.57 in 1936 to one of its creditors in accordance with a written contract executed by the taxpayer prior to May 1, 1936, and such amount was not available for dividend payments; the district court held that, under the above statutory provision, the taxpayer was entitled…