Kilby Steel Co. v. Commissioner
United States Board of Tax Appeals
Where a corporation is party to a contract with creditor banks forbidding, without written permission of the banks, the declaration of dividends, such corporation being in dire financial straits, which fact is well known to the banks, held, it is not necessary, as a prerequisite to taking credit under section 26(c)(1) of the Revenue Act of 1936, that the corporation request and obtain written refusal of permission to pay dividends.
1Opinion of the Court
OPINION.
Van Fossan:
The respondent determined a deficiency of $9,427.59 in income tax for the taxable year 1936 consequent on the disallowance of a credit of $46,404.83 claimed by petitioner on account of a contract restricting the payment of dividends. The contract, dated November 25, 1935, was with the Federal Reserve Bank of Atlanta, Georgia, and the First National Bank of Birmingham, Alabama. It provided:
So long as said items of indebtedness, or either of them, • are unpaid, the company will not declare dividends in any form on its capital stock except with the permission, in writing, of…
2Cited by3 opinions
- Kilby Steel Co. v. CommissionerUnited States Board of Tax Appeals · 1940
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