Darrow v. Commissioner
United States Tax Court
64 T.C. 217 (1975)
- Written by Eric Miller, JD
Facts
Kenneth Darrow (plaintiff) and Renee Liddle were each 50 percent shareholders in Rendar Enterprises, Ltd. (Rendar), which derived most of its gross income from rents. In March 1968, Rendar declared a dividend of $2,000 in an attempt to avoid the assessment of a personal-holding-company tax by the Internal Revenue Service (IRS). However, on the advice of Darrow’s accountants, payment of the dividend did not occur until September 1968—after the July 31 end date of the 1968 fiscal year. Rendar paid no other dividends in the 1968 fiscal year. The Commissioner of Internal Revenue (the commissioner) (defendant) assessed a deficiency, determining that Rendar was a personal holding company for the fiscal year 1968, and that payment of a dividend of at least $1,548.52 would have been necessary to avoid that status. Challenging the assessment in federal tax court, Darrow argued that the $2,000 dividend paid in September could be imputed to the fiscal year ending July 31 based on a provision that imputed dividends paid within two and a half months after the end of a tax year to the last day of that tax year.
Rule of Law
Issue
Holding and Reasoning (Forrester, J.)
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