
    Appeal of PACIFIC COAST FURNITURE CO.
    Docket No. 90.
    Submitted June 24, 1925.
    Decided September 30, 1925.
    
      Frank M. Aitken, Esq., for the taxpayer.
    
      W. Frank Gibbs, Esq., for the Commissioner.
    Before GkaxtpNER, Tííammell, and Phillips.
   This appeal is from the determination of a deficiency in income tax for the fiscal years ended January 31, 1919, 1920, and 1921, in the net amount of $1,708.61, being the sum of the proposed additional taxes for the fiscal years 1919 and 1920, less the amount of an over-assessment of $20.38 for the fiscal year ended January 31, 1921. The only question presented in the appeal is the disallowance by the Commissioner of additional compensation allowed the officers for the fiscal year ended in 1920 in the amount of $3,600. No question is presented with respect to the proposed additional tax for the fiscal year ended January 31, 1919.

FINDINGS OF FACT.

The Pacific Coast Furniture Co. is a corporation organized under the laws of California, having its principal place of business at Santa Cruz. During the taxable years in question it had outstanding 240 shares of capital stock of the par value of $100 per share. One hundred and twenty shares were owned by George A. Montell and 120 shares by Fred A. Carrick. Montell devoted about one-half his time to the business and the other one-half to the Palo Alto Furniture Co. at Palo Alto, Calif. Carrick lived in San Francisco. Every two or three months he would come down to Santa Cruz and he and Montell would get together and talk over plans and policies of the.corporation and decide on what was to be done and the methods of transacting their business. Carrick devoted only a part of his time to the business also. Neither Carrick nor Montell drew or received from the corporation definite amounts of money by way of salary, but the corporation credited on its books certain amounts to them. Each drew what he needed for living expenses. During February, 1918, and at other times Montell and Carrick talked over the question of an increase in salary for each of them for the fiscal year ending in February, 1919. There were no book entries made, nor was any record of any minutes or any memorandum made which would indicate any official action with respect to an increase of salaries for the fiscal years ended 1919 and 1920 or 1921. When the income-tax return was prepared by the bookkeeper, Montell, after examining it, returned it to the bookkeeper with the statement that neither he nor Carrick had been credited with the proper amount of salary.

The additional compensation of $3,600 to the two officers was not credited to them on the boobs until April, 1921, after the income-tas return for the fiscal year involved had been prepared.

DECISION.

The determination of the Commissioner is approved.

Artjndell not participating.  