Maumee Malleable Castings Co. v. Commissioner
United States Board of Tax Appeals
Prior to May 1, 1936, petitioner executed a written contract which contained a provision prohibiting it from paying dividends until a debt owed by it was paid in full. By the terms of the debt petitioner was not required to pay it in full in the taxable year, but was permitted to do so. At the very end of the taxable year petitioner was able financially to pay the debt in full; and shortly after the end of the taxable year petitioner did pay the debt in full.
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Prior to May 1, 1936, petitioner executed a written contract which contained a provision prohibiting it from paying dividends until a debt owed by it was paid in full. By the terms of the debt petitioner was not required to pay it in full in the taxable year, but was permitted to do so. At the very end of the taxable year petitioner was able financially to pay the debt in full; and shortly after the end of the taxable year petitioner did pay the debt in full. Petitioner's failure to pay the debt in full in the taxable year was actuated by sound business purposes. Held, that under section…
1Opinion of the Court
*267OPINION.
HaRron :
The sole question is whether under section 26 (c) (1) of the Revenue Act of 1936 petitioner is entitled to a credit in the amount of its adjusted net income for purposes of computation of the surtax, on undistributed profits. >
Section 26 (c) (1) of the Revenue Act of 1936, in so far as pertinent to the present question, provides as follows:
In the ease of a corporation the following credits shall be allowed to the extent provided in the various sections imposing tax-—
* * * * *'*■*.(c) Contracts Restricting Payment op Dividends.—(1) Prohibition on payment of dividends.—An amount…
2Cited by3 opinions
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