Opinion · Court of Appeals for the Second Circuit

Janeway v. Commissioner of Internal Revenue

Janeway v. Comm’r of Internal Revenue, 147 F.2d 602 (2d Cir. 1945)

Type
Opinion
Court
Court of Appeals for the Second Circuit
Jurisdiction
Federal
Date
1945-02-06
Topic
estate-planning

FRANK, Circuit Judge. We read the findings of the Tax Court taken together with its opinion 1 as saying that, as a matter of fact, all the payments made by the taxpayers to the corporation were capital contributions of such character that, as against any third persons (such as, e.g., persons contracting with the corporation) the taxpayers would have to be regarded as stockholders and nothing else. As the Tax Court’s conclusion rests upon a determination of fact supported by substantial evidence, 2 we cannot disturb it, even under a restricted interpretation of Dobson v. Commissioner, 320 U.S. 489, 64 S.Ct. 239. 3 Accepting that conclusion, the decision of the Tax Court is correct. Affirmed. 1 That we may do so, see, e.g., Insurance & Title Guarantee Co. v.

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JANEWAY v. COMMISSIONER OF INTERNAL REVENUE,147 F.2d 602(2nd Cir. 1945)
JANEWAY et ux. v. COMMISSIONER OF INTERNAL REVENUE. SHIELDS v. SAME.
Nos. 29, 30.
Circuit Court of Appeals, Second Circuit.
February 6, 1945.
Petitions to Review Decisions of the Tax Court of the United States.

Petitions by Edward G. Janeway and wife against the Commissioner of Internal Revenue, and by Robert McC. Shields against the same respondent, to review decisions of the Tax Court of the United States,2 T.C. 197.

Affirmed.

The Tax Court held that payments made in 1934 and 1935 by the taxpayers to a corporation, of which they owned all the stock, consisted of contributions to capital, although for the greater part of those payments the company had issued its promissory notes to the taxpayers. On that basis, the Tax Court, sustaining the Commissioner, held that the taxpayers, when their investment became worthless in the taxable year 1939, could not deduct the amounts in full as bad debts under §23(k) of the Internal Revenue Code applicable to that taxable year but could deduct only 50% thereof under § 23(g) and § 117.

The finding of facts and opinion of the Tax Court, reported in2 T.C. 197, sufficiently state all the facts except that perhaps these facts should also be noted: Taxpayer, Edward G. Janeway, testified that when he made the first payment of $5000 to the company, he "did not feel any part of that represented stock," although he then received three shares, and that the same was true when he made a later payment. "We paid no money for the stock," he said, "other than the amounts which we designated as loans to the company." Taxpayer, Robert McC. Shields, similarly testified.
Wright, Gordon, Zachry, Parlin Cahill, of New York City (Charles C. Parlin and Robert C. Brown, both of New York City, of counsel), for petitioners.

Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key, A.F. Prescott, and Newton K. Fox, all of Washington, D.C., for respondent.
Before CHASE, HUTCHESON, and FRANK, Circuit Judges.
FRANK, Circuit Judge.
We read the findings of the Tax Court taken together with its opinion1as saying that, as a matter of fact, all the payments made by the taxpayers to the corporation were capital contributions of such character that, as against any third persons (such as, e.g., persons contracting with the corporation) the taxpayers would have to be regarded as stockholders and nothing else. As the Tax Court's conclusion rests upon a determination of fact supported by substantial evidence,2we cannot disturb it, even under a restricted interpretation of Dobson v. Commissioner,320 U.S. 489, 64 S.Ct. 239.3Accepting that conclusion, the decision of the Tax Court is correct.

Affirmed.Page 603
  1. That we may do so, see, e.g., Insurance Title Guarantee Co. v. Commissioner, 2 Cir.,36 F.2d 842, 845; California Iron Yards Co. v. Commissioner, 8 Cir.,47 F.2d 514, 518; Producers' Creamery Co. v. United States, 5 Cir.,55 F.2d 104, 106; Emerald Oil Co. v. Commissioner, 10 Cir.,72 F.2d 681, 683; Flynn v. Commissioner, 5 Cir., 77 F.2d 180, 183; California Barrel Co., Inc. v. Commissioner, 9 Cir.,81 F.2d 190, 193; Baker v. Commissioner, 6 Cir.,115 F.2d 987, 989. ↩
  2. Involved is the question of the credibility of the witnesses as to the taxpayers' intentions, a question surely for the Tax Court. ↩
  3. See Paul, Dobson v. Commissioner: The Strange Ways of Law and Fact (1944), 57 Harv.L.Rev. 753, 822-831; Buckminster's Estate v. Commissioner, 2 Cir., 1944,147 F.2d 331. ↩