Grain King Mfg. Co. v. Commissioner
United States Board of Tax Appeals
1. The cost of goods sold by petitioner in its first taxable year should be computed by using as an opening inventory the cost of merchandise to individuals who transferred it to petitioner in exchange for stock. Sections 203(b)(4) and 204(a)(8) of the Revenue Act of 1924. 2. The basis for computing depreciation on property paid in for stock in a corporation is the cost to the transferor.
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1. The cost of goods sold by petitioner in its first taxable year should be computed by using as an opening inventory the cost of merchandise to individuals who transferred it to petitioner in exchange for stock. Sections 203(b)(4) and 204(a)(8) of the Revenue Act of 1924. 2. The basis for computing depreciation on property paid in for stock in a corporation is the cost to the transferor. Section 204(c) of the Revenue Act of 1924. 3. Expenses of organization and refinancing are not deductible as ordinary and necessary operating expenses.
1Opinion of the Court
*794OPINION.
Lansdon:
There are three issues to be determined in this proceeding— (1) the correct opening inventory for the taxable year 1924; (2) the proper deductions for depreciation in each of the years, and; *795(3) whether organization expenses should be deducted in computing net income.
On January 24,1924, petitioner received from a group of individuals in exchange for all of its capital stock of a par value of $300,000, certain assets which it set up on its books at a value of $444,936.81. Standing as a liability against this amount was a mortgage assumed in the amount of $110,000. The…
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