First Nat. Corp. of Portland v. Commissioner of Internal Revenue

This is a petition to review a decision of the Tax Court sustaining the assessment of deficiencies in income and excess profits taxes of the petitioning taxpayer for the year 1937.

Taxpayer’s books were kept on the accrual basis. At all times here material more than 95% of its voting stock was owned by Transamerica Corporation. The taxpayer owned all the stock of four small Oregon banks. The taxpayer and Transamerica between them owned 63% of the voting stock of the First National Bank of Portland (hereafter called First Bank).

In the spring of 1933 legislation was enacted in Oregon legalizing branch banking. First Bank wished to acquire the four small banks and operate them as branches, and taxpayer, as sole owner of their stock, desired thus to dispose of them. However, *463 the law tinder which First Bank was incorporated did not permit it to purchase stock of banks. As a substitute for such acquisition an oral agreement was made April 2, 1933, between the taxpayer and First Bank by which the properties of the four banks were turned over to the latter. Thereafter tlieir businesses were operated by First Bank as its branches. 1 Negotiations in respect of the consideration to…