Gerli & Co., Inc. v. Commissioner of Internal Revenue

CONNER, District Judge:

This is an appeal pursuant to 26 U.S.C. § 7482 from a decision of the United States Tax Court, 73 T.C. 1019, determining a deficiency in the tax return of appellant Gerli & Co., Inc. (“Gerli”) for the taxable year 1965 in the amount of $346,448.50 and imposing a 5% penalty in the amount of $17,-332.42 pursuant to 26 U.S.C. § 6653(a).

Factual and Procedural Background

Gerli, a Delaware corporation engaged in textile manufacturing, had a wholly owned Canadian subsidiary, La France Textiles, Ltd. (“LFT”) which was established in 1927 1 and operated profitably for many years.…