Okonite Co. v. Commissioner
United States Tax Court
1. Respondent's method of accounting for profit on reels sold by petitioner, approved. 2. Under a trust agreement executed in connection with a bond issue, petitioner covenanted that it would pay no dividends on any of its capital stock until the sinking fund requirements as to the bonds were paid or provided for.
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1. Respondent's method of accounting for profit on reels sold by petitioner, approved. 2. Under a trust agreement executed in connection with a bond issue, petitioner covenanted that it would pay no dividends on any of its capital stock until the sinking fund requirements as to the bonds were paid or provided for. Held, after making provision for all sinking fund payments, the amounts distributable as dividends during the taxable years were in excess of the petitioner's adjusted net income for said years and no credit is allowable under section 26 (c) (1), Revenue Act of 1936; held, further,…
1Opinion of the Court
OPINION.
Van Fossan, Judge:
The first question for determination is whether petitioner’s method of accounting correctly reflects income with reference to its transactions in reels.
In addition to the contract price of goods sold, petitioner charged fixed amounts for the reels on which its wire and cable were shipped. These fixed amounts were in excess of the actual cost of the reels. This profit was placed in a reserve account styled “Reel Contingent Profit Reserve.” As reels were returned the petitioner deducted from the account the amount of profit previously added for reels shipped. The net…
2Cases cited2 opinions
- Knapp Monarch Co. v. CommissionerUnited States Tax Court · 1942
- Wellhouse v. CommissionerUnited States Tax Court · 1944
3Cited by19 opinions
- Automobile Club of New York, Inc. v. CommissionerUnited States Tax Court · 1959
- E. I. Du Pont De Nemours and Company v. United StatesUnited States Court of Claims · 1961
- Okonite Co. v. Commissioner of Internal RevenueCourt of Appeals for the Third Circuit · 1946
- William P. Burrell and Billie Joe Burrell v. Commissioner of Internal Revenue, Engine Rebuilders, Inc. v. Commissioner of Internal RevenueCourt of Appeals for the Tenth Circuit · 1968
- Fred Nesbit Distributing Co. v. United StatesDistrict Court, S.D. Iowa · 1985
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