Rubber Associates, Inc. v. Commissioner of Internal Revenue

WILLIAM E. MILLER, District Judge.

The question for decision is whether the Tax Court correctly found that payments by the taxpayer corporation to widows of shareholders represented nondeductible distributions of profits, rather than deductible ordinary and necessary business expenses under Sections 162(a) (1) and 404(a) (5) of the 1954 Internal Revenue Code. 1

The material facts were stipulated and are essentially as follows: Rubber Associates, Inc. was organized on March 1, 1953 by five men (Glass, Bowie, Bra-saemle, Brueggeman, and Brouse). The incorporators each received 20% of the…