Fairfax Mut. Wood Products Co. v. Commissioner
United States Tax Court
1. Where a corporation's gross income appears to have been entirely derived from trading as a principal and it appears that the use of capital in the business was a material income-producing factor, held, such corporation is not entitled to the classification of a personal service corporation under section 725 (a) of the Internal Revenue Code. 2. In the circumstances here present a penalty of 25 percent under section 291 (a) of the Internal Revenue Code for failure to file…
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1. Where a corporation's gross income appears to have been entirely derived from trading as a principal and it appears that the use of capital in the business was a material income-producing factor, held, such corporation is not entitled to the classification of a personal service corporation under section 725 (a) of the Internal Revenue Code. 2. In the circumstances here present a penalty of 25 percent under section 291 (a) of the Internal Revenue Code for failure to file an excess profits tax return may not be imposed.
1Opinion of the Court
OPINION.
Akttndell, Judge:
The principal question is whether the petitioner was a personal service corporation in 1941. Under the applicable statute, section 725 (a) of the Internal Revenue Code,1 certain requirements must be met before a corporation is entitled to be so classified. In the main, the standards set are that the corporate income must be ascribed primarily to the activities of shareholders who are regularly engaged in the business and at all times own at least 70 percent of the corporation’s capital stock. Capital must not be a material income-producing factor. Any corporation 50…
2Cases cited1 opinion
- Spies v. United StatesSupreme Court of the United States · 1943
3Cited by32 opinions
- Sperapani v. CommissionerUnited States Tax Court · 1964
- Danco Co. v. CommissionerUnited States Tax Court · 1950
- Rousku v. CommissionerUnited States Tax Court · 1971
- Moore v. CommissionerUnited States Tax Court · 1979
- Gaudern v. CommissionerUnited States Tax Court · 1981
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