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Adams Tooling Inc. v. Commissioner of Internal Revenue

April 19, 1961

ADAMS TOOLING, INC., AN INDIANA CORPORATION, PETITIONER-APPELLANT,
v.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT-APPELLEE.



Author: Schnackenberg

Before SCHNACKENBERG and CASTLE, Circuit Judges, and GRUBB, District Judge.

SCHNACKENBERG, Circuit Judge.

From the Tax Court's decision*fn1 determining deficiencies in income tax of Adams Tooling, Inc., an Indiana corporation, petitioner, for the years 1952 and 1953, it appeals to this court.

This is a companion case to No. 13105 in this court, Huckins Tool and Die, Inc. v. Commissioner, 289 F.2d 549, a joint appendix covering both cases having been filed in this court. The cases were tried before the same judge in the Tax Court, where, by agreement of the parties, much of the evidence was introduced and incorporated in both cases.

Based upon evidence received, as well as a stipulation of facts, the court made findings of fact, the most salient of which we now state, in substance.

Petitioner was organized under Indiana law in 1926. During the taxable years petitioner was engaged in the business of tool and die job shop, in South Bend, Indiana. It specializes in designing and building tools for the aircraft industry and more especially in jet engine parts. These jobs are rather large in scope and rather difficult from an engineering standpoint.

A shop of this character has no fixed or standard product, and is to be distinguished from shops in which end products are manufactured and assembled. The complexities of design and fabrication were such that highly skilled labor was required and technical skill was necessary to manufacture tools and dies, where tolerances must, in some instances, be held to a range of no greater than.0001 of an inch.

Conrad R. Adams is the father of Robert C. Adams. Conrad was born in 1881 and Robert was born in 1911. During the years in question they devoted their time exclusively to the business of petitioner. Petitioner's stock was owned by members of the Adams family and during the relevant period the father and son each owned about one-third of the stock and controlled the corporation.

In the taxable years, ownership of petitioner's outstanding 99 shares of stock was as follows:

1952 1953

Conrad R. Adams 33 30

Lillian M. Adams 31 28

Robert C. Adams 33 33

Linda E. Adams 2 4

Conrad R. Adams 2

Linda Lee Adams 2

During 1952 the officers of petitioner were:

Conrad R. Adams, president,

Robert C. Adams, vice president and general manager,

Edwin B. Hampel, vice president and works manager,

Richard Kazmierzak, secretary-treasurer.

In 1953 the officers were the same, except that Fred Binder, Jr., ...


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