Stimson Mill Co. v. Commissioner of Internal Revenue

The question presented by this petition is whether § 713(e) (1) and § 722 of the Internal Revenue Code, 26 U.S.C.A. Int. Rev.Code, §§ 713(e) (1), 722, in force in 1942, may both be used to determine the excess profits credit of a taxpayer for the year 1942, or whether the two sections are mutually exclusive.

We will refer herein to petitioner as taxpayer, and to respondent as the Government. The facts and the statutory provisions are both lengthy and complex. We therefore set them forth in some detail.

The statutory scheme of the now-repealed excess profits tax was to separate corporate profits earned during the war years into two classes, normal and excess, and to tax each class of profits at different rates.

Under the 1942 law, applicable here, a corporate taxpayer first determined its ordinary net income, or “normal tax income”, and then, by additions and subtractions to that figure, not material here, determined its “excess profits net income”. From this last item, certain deductions are made, the most important of which is the “excess profits credit”. This credit represents the statutory standard of normal earnings. Once this “excess profits credit” is determined it…