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Messer v. Commissioner of Internal Revenue

decided: February 10, 1971.

SIDNEY MESSER, TRANSFEREE, APPELLANT IN NO. 18,731 NAT MALAMUTH, TRANSFEREE, APPELLANT IN NO. 18,732 ESTATE OF SAMUEL ANTKIES, DECEASED, TRANSFEREE, JACK ANTKIES AND SHIRLEY ANTKIES, EXECUTORS, APPELLANT IN NO. 18,733
v.
COMMISSIONER OF INTERNAL REVENUE



McLaughlin, Freedman and Van Dusen, Circuit Judges.

Author: Mclaughlin

Opinion OF THE COURT

MCLAUGHLIN, Circuit Judge.

This is a joint appeal by two individuals and an estate, as transferees of the assets of Tel-O-Tube Corporation of America (Tel-O-Tube), the transferor, from decisions of the Tax Court entered October 10, 1969. The court below found that Tel-O-Tube owed federal income tax in the amount of $39,158.43 for its taxable year ending September 30, 1961 and asserted income tax liabilities against each of the appellants, as transferees of the assets of the dissolved corporation, in the same amount. The Findings of Fact and Opinion of the Tax Court are reported at 52 T.C. 440 (1969).*fn1 Jurisdiction in this Court is conferred by 26 U.S.C. ยง 7482.

The facts, as stipulated in part and as found by the Tax Court, are as follows:

Tel-O-Tube was incorporated in 1948 under the laws of New Jersey to engage in the manufacture and sale of television picture tubes. Commencing in 1953, it filed its federal income tax returns on an accrual basis for fiscal years ending September 30. Until July 10, 1960, Sidney Messer, Nat Malamuth and Samuel Antkies were the corporation's sole stockholders, each owning one-third of its stock. On July 10, 1960, Samuel Antkies died, and his estate, with Jack Antkies and Shirley Antkies acting as coexecutors, succeeded to his one-third interest in Tel-O-Tube.

Tel-O-Tube conducted its manufacturing operations under a patent licensing arrangement with Radio Corporation of America (R.C.A.), and for each of its fiscal years 1953 through 1957 accrued and deducted the following royalties due R.C.A.:

1953 $20,032.15

1954 23,757.49

1955 28,439.19

1956 22,249.20

1957 17,727.62

Total $112,205.65

These royalties were not actually paid and in April, 1957, the corporation issued a series of promissory notes, covering the obligation, payable to R.C.A. and becoming due beginning April 1, 1962 and annually thereafter through April 1, 1974.

In 1957, the corporation terminated its manufacturing and sales operations and disposed of its operating assets. $100,000 of the proceeds of this sale was utilized to purchase four income-producing notes of the Manufacturers Credit Corporation. One of the purposes of this investment was to create a funded reserve for Tel -O-Tube's indebtedness to R.C.A. In the years 1958, 1959 and 1960, the income of the corporation consisted only of ...


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