Docket No. 1

The new Federal Board of Tax Appeals (Time, July 28) has begun to function. It decided its first case and gave out its findings. The report, from the early date of its appearance, and from its brevity (only seven typewritten pages) seems to indicate that the Board is functioning in a direct and businesslike way.

It begins:

Appeal of John H. Parrott (Docket No. 1). Submitted August 19, 1924, to the Board, all members present.

Decided August 27, 1924.

This appeal was heard on an agreed statement of facts.

The findings of fact were that the taxpayer had been General Superintendent of a coal company and a member of its Board of Directors. He had received $7,000 in salary and $3,500 as a yearly bonus, as well as directors' fees. The coal company had no regular system of paying pensions. It had a large surplus. The Directors' shares were sold, and the Board of Directors made a "gratuitous appropriation," equal to $3.00 a share, which was divided among various retiring employes. One of these was Mr. Parrott, who received $35,000. Mr. Parrott reported this sum as a gift and therefore not taxable. The coal company reported the appropriation as a salary deduction from gross income and therefore not taxable to it. The Commissioner of Internal Revenue contended that the sum conveyed to Mr. Parrott was in the nature of a bonus or adjusted compensation, and therefore taxable to him.

The Board decided in favor of the Commissioner of Internal Revenue and against Mr. Parrott.

The decision said in part:

"We must judge the corporate intent from the corporate acts themselves, not from the interpretation placed upon them by some individual. . . . Corporate action is presumed regular ... payment of a bonus would be regular, the making of a gift would be irregular."

The entire Board concurred with the exception of Chairman Hamel, who took no part in considering the appeal.

Thus Docket No. 1 passed into history.