
    Maurice L. Stern, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket Nos. 6049, 6050.
    Promulgated May 11, 1928.
    
      Maurice Z. Stem pro se.
    
      Thomas P. Dudley, Jr., Esq., for the respondent.
   OPINION.

Love:

The only question raised by the pleadings with respect to the deficiency for the year 1917 was the date of incorporation of the company which took over the business theretofore conducted by petitioner.

The corporation made a return covering the period from February 1, 1917, to January 31, 1918, and upon audit thereof the Commissioner determined that the date of incorporation was April 24, 1917, and, accordingly, that portion of the earnings attributed to the period from February 1, 1917, to April 24, 1917, was restored to petitioner’s income.

At the hearing petitioner stated that April 24, 1917, was the date of incorporation. We approve, therefore, the Commissioner’s determination with respect to the year 1917. See Peter W. Rouss, 4 B. T. A. 516.

The question with respect to the year 1923 is whether petitioner may deduct in his return part of a loss sustained by a corporation of which he was the principal stockholder. The petitioner, in contending that he is so entitled, relies upon section 220 of the Revenue Act of 1921, which in part provides:

That if any corporation, however created or organized, is formed or availed of for the purpose of preventing the imposition of the surtax upon its stockholders or members through the medium of permitting its gains and profits to accumulate instead of being divided or distributed, there shall be levied, collected, and paid for each taxable year upon the net income of such corporation a tax equal to 25 per centum of the amount thereof, which shall be in addition to the tax imposed by section 230 of this title and shall be computed, collected, and paid upon the same basis and in the same manner and subject to the same provisions of law, including- penalties, as that tax: Provided, That if all the stockholders or members of such corporation agree thereto, the Commissioner may, in lieu of all income war-profits and excess-profits taxes imposed upon the corporation for the taxable year, tax the stockholders or members of such corporation upon their distributive shares in the het- income of the corporation for the taxable year in the same manner as provided in subdivision (a) of section 218 in the case of members of a partnership.

This section becomes operative only when the corporation has withheld distribution of its earnings and has become liable to the 25 per cent additional tax provided therein, and has no application to a loss such as is involved in this proceeding and does not entitle a stockholder to deduct any part of the corporate loss.

The Commissioner’s determination with respect to the year 1923 is approved.

Judgment will entered for the respondent.  