
    Appeal of PHOENIX SEED & FEED CO.
    Docket No. 1955.
    Submitted July 15, 1925.
    Decided October 19, 1925.
    Method of determining excess-profits tax for 1917.
    
      Lawrence Tl. Bogers, G. P. A., for the taxpayer.
    
      John D. Foley, Esq., for the Commissioner.
    Before GkaupneR, Trammell, and Phillips.
   This appeal is from the determination of a deficiency in income and profits taxes for the fiscal years ended May 31, 1917, 1918, and 1919, in the amount of $8,097.59. It is based upon the following alleged errors on the part of the Commissioner: (1) That invested capital has been erroneously reduced by taking from surplus $7,900 of the capital stock instead of $5,646.90, the difference between the par value and the actual amount paid for the stock. This alleged error was waived by the taxpayer at the hearing. (2) That the 4 per cent tax for the fiscal year ended May 31, 1917, was erroneously computed on the basis of five-twelfths of the difference between the net income and the excess-profits tax instead of five-twelfths of the net income less the entire excess-profits tax. (3) Additions by the Commissioner of alleged unreported income of $497 for the year ended May 31, 1918. It was conceded by the Commissioner at the hearing that this was an error. (4) That there was an error of 19 cents in computation of the income tax. This was conceded by the Commissioner at the hearing. (5) That the income for the year ended April 30, 1920, should be $5,588.48 instead of $5,589.48. This allegation of error was waived by the taxpayer at the hearing.

FINDINGS OP PACT.

The taxpayer is an Arizona corporation with its principal place of business at Phoenix. It is engaged in the purchase and sale, at wholesale and retail, of seeds, feed and grain, and miscellaneous merchandise. The Arizona Seed & Floral Co. is a subsidiary corporation engaged in the purchase and sale, at retail, of seeds, cut flowers, etc.

In view of the concessions made by the taxpayer and the Commissioner at the hearing, this appeal has been narrowed to the one question of the method of the computation of the 4 per cent tax for the fiscal year ended May 31, 1917.

For the fiscal year ended May 31, 1917, the Bureau, by its method of computation, claims a tax in excess of that claimed by the taxpayer, equal to> 4 per cent on the proportion of the excess profits tax which in effect is apportioned to that part of the fiscal year falling in the calendar year 1916. Of the fiscal year ended in 1917, seven-twelfths fell within the calendar year 1916 and five-twelfths within the calendar year 1917. The Commissioner contended that the additional income tax of 4 per cent imposed by the Revenue Act of 1917 upon the proportion of net income of a fiscal year ending in 1917 which the number of months in 1917 is to 12 months is computed upon the proportion of the net income of the fiscal year after applying the credit of profits tax to the whole fiscal year’s income and not by applying the credit to the 1917 proportion of the fiscal year’s income.

DECISION.

The deficiency should be computed in accordance with the concessions of the parties and the decision of the Board in the Appeal of F. J. Thompson, Inc., 1 B. T. A. 535. Final determination will be settled on consent or on 15 days’ notice, in accordance with Rule 50.  