John Scowcroft & Sons Co. v. Commissioner
United States Board of Tax Appeals
Where two corporations are affiliated the consolidated net income is to be computed as for one corporation and the sale by one of such corporations of some of its stockholdings in the other, affiliation continuing, should be treated, for the purpose of the income tax, as a sale by the affiliated group of its capital stock and as a capital transaction, giving rise to neither a taxable gain nor a deductible loss.
1Opinion of the Court
OFINION.
Sea well :
The record shows that the petitioner and the Scowcroft Investment Co. were affiliated throughout the taxable year 1923.
*533The sale by the Scowcroft Investment Co. of 429 shares of the capital stock of petitioner which it owned did not destroy such affiliation. They filed a consolidated return for the taxable year in question. They were, for the purpose of the income tax for that year, one and the same taxpayer. The sale was a capital transaction which could not give rise to a taxable gain or a deductible loss, and this is true whether the sale of the stock was to members of the…
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