Knoch, Kiley and Swygert, Circuit Judges.
The Renegotiation Board, respondent herein, decided that the petitioner, Consolidated-Hammer Dry Plate and Film Company, had realized $75,000 excessive profits on renegotiable contracts during the taxable year 1951. The Tax Court on appeal came to the same conclusion.
In this Court, the petitioner seeks review contending that the Tax Court erred in failing (1) to find the petitioner exempt from the Renegotiation Act of 1951, Title 50 U.S.C.A. App. § 1211 et seq.; (2) to exclude certain accruals; (3) to require proper burden of proof; and (4) to make proper findings and conclusions of law.
The Act provided that of the amounts received or accrued during a fiscal year by a contractor (and all persons under control of or controlling or under common control with the contractor) under contracts which were subject to renegotiation, if the aggregate was not more than $250,000, then the receipts or accruals from such contracts should not for that fiscal year be renegotiated under the Act, Title 50 U.S.C.A. App. § 1215(f) (1). (Contracts subject to renegotiation are contracts with the Departments of Defense, Army, Navy, and Air Force to the extent of amounts received or accrued by a contractor on or after January 1, 1951. Title 50 U.S.C.A. App. § 1212.)
If the aggregate of such amounts received or accrued was more than $250,000, then no determination of excessive profits for such year with respect to such contracts would be for more than the amount of the aggregate in excess of $250,000. Title 50, U.S.C.A. App. § 1215(f) (1).
If preliminary renegotiations between the Board and the contractor failed to result in an agreement, the Board would enter an order determining the amount of excessive profits. Absent a petition for review to the Tax Court, the Board's order would be conclusive subject to no review or redetermination. Title 50 U.S.C.A. App. § 1215(a).
An aggrieved contractor could petition the Tax Court for redetermination, posting bond to stay execution of the Board's order. Title 50 U.S.C.A. App. § 1218.
The petitioner here did not post such bond. A suit to recover $75,000 plus interest, Civ. No. 59 C 370, is pending presently in the U.S. District Court for the Northern District of Illinois.
When a petition for redetermination is filed with the Tax Court, that Court may redetermine the amount of excessive profits, if any, in a de novo proceeding, and "such determination shall not be reviewed or redetermined by any court or agency." Title 50 U.S.C.A. App. § 1218.
Profits for purposes of the Act are defined as the excess of the amount received or accrued under the contracts with which the Act is concerned over the costs paid or incurred with respect to those contracts and determined to be allocable to them. The Act provides that costs shall be determined in accordance with the method of accounting regularly employed by the contractor in keeping his records unless the Board, or the Tax Court, finds that his method does not properly reflect his costs, Title 50 U.S.C.A. App. § 1213(f).
If the Board or the Tax Court finds the contractor's method improper, the Board or Tax Court will determine the method to be used. Title 50 U.S.C.A. App. § 1213(i).
The facts out of which this cause arose are largely undisputed. The Consolidated Photo Engravers and Lithographers Equipment Company (hereinafter called "Photo") was wholly owned by Benjamin Sugarman and his family. It made profits in fiscal years 1948, 1949 and 1950. Mr. Sugarman also owned 90% of Consolidated-Hammer Dry Plate and Film Company, the petitioner herein, which suffered losses during those same three years. On August 31, 1951, Photo was merged into petitioner, after which the Sugarman family continued to own 98.5% of the stock and Mr. Sugarman, who had been president and treasurer of both companies, continued to serve in those capacities for petitioner.
The substantial loss carry-forward of the petitioner was utilized in the petitioner's tax returns for 1951, and no taxable income was reported. The petitioner had no renegotiable contracts prior to the merger, but through the merger acquired profit-generating business with ...