Nos. 466, 467.Circuit Court of Appeals, Second Circuit.
June 17, 1935.
Appeal from the Board of Tax Appeals.
Petitions by V. Vivaudou, Inc., and by the Alfred H. Smith Company to review a decision of the Board of Tax Appeals redetermining a deficiency in the tax imposed by the Commissioner of Internal Revenue.
Decision affirmed.
Louis Schapiro, of New York City (Harold Wisan, of New York City, of counsel), for petitioner.
Frank J. Wideman, Asst. Atty. Gen., and Sewall Key and Edward H. Hammond, Sp. Assts. to Atty. Gen., for respondent.
Before MANTON, SWAN, and CHASE, Circuit Judges.
PER CURIAM.
The V. Vivaudou, Inc., was a Delaware corporation, and Alfred H. Smith Company was a New York corporation, during the taxable years 1926 and 1927. The former acquired the assets of the latter. During 1926 and 1927, V. Vivaudou, Inc., was the parent corporation of a group of affiliated corporations which filed a consolidated income tax return for such years. The operations for the year 1927 of Alfred H. Smith Company were included in the operations and returns of V. Vivaudou, Inc., for that year because during the year the assets of Alfred H. Smith Company were acquired by V. Vivaudou, Inc. The corporations were held by the Commissioner to be affiliated and entitled to file a consolidated return for 1926 and 1927. During the calendar year 1926, each taxpayer had a net income as follows: V. Vivaudou, Inc., $520,009.11; Alfred H. Smith Company, $548,602.21. During 1924 and 1925, V. Vivaudou, Inc., was affiliated with other corporations, which it owned, and satisfied the Commissioner of its affiliation under the law during these years. During 1924, V. Vivaudou, Inc., and an affiliate, after absorption by them of the profit during the year of another affiliate, had a net loss to be carried forward as deductions in computing net income for succeeding years under the provisions of the Revenue Act, and after applications in the year 1925, of a part of said 1924 net loss, there remained a net loss in the case of V. Vivaudou, Inc., of $804,347.40 to be carried forward as deductions in computing net income for the year 1926. The net income for the calendar year 1927 of V. Vivaudou, Inc., was $857,943.07. Commencing January 1, 1926, and until the assets of Alfred H. Smith Company were taken over by V. Vivaudou, Inc., all the capital stock of the former was owned by the latter. The directors and officers were the same persons. The corporations occupied the same offices and the same staff of employees carried on their respective functions.
The question presented here is whether V. Vivaudou, Inc., can deduct its loss in a consolidated return of these two corporations only from the income of the corporation suffering the loss, or also from the income of the other corporation. We hold that the corporate fiction cannot be disregarded to permit such deduction from the income of the Alfred H. Smith Company. These corporations made use of their distinct identity, and have had the benefits from such use by filing a consolidated return wherein each taxpayer was set up as a separate corporation. They cannot now deny that they are separate entities. The decision must be affirmed on the authority
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of Woolford Realty Co. v. Rose, 286 U.S. 319, 52 S. Ct. 568, 76 L. Ed. 1128; Planters’ Oil Co. v. Hopkins, 286 U.S. 332, 52 S. Ct. 509, 76 L. Ed. 1135; Commissioner v. Ben Ginsburg Co. (C.C.A.) 54 F.2d 238.
Decision affirmed.