‘ THATCHER ROY D. THATCHER PAUL THATCHER LEROY B. BUILDING BANK OGDEN,UTAH April M. A. Browning Je Me & M. S. Ogden, Utah Dear YOUNG PAWYER'S SECURITY FIRST YOUNG Mr. & Mr. Browning Not Res being 1969 Company Brownings supplemental 18, Agency entirely agreement Agreement. satisfied heretofore with submitted today rewritten it so that it will embody of your agreement to be effective between after it takes the mitting two copies place of for your all the form you, have also added a final agreement shall apply to I of the have of the terms two companies the former agreement. further consideration. observe that it takes effect on May date arbitrarily. When the form is date you desire can be substituted. I the to I am You subwill 1, 1939. I selected that finally submitted, any paragraph all sales providing that made before the former on to an earlier date, except that I think it would be best not make it apply from a date earlier than the time it can to me May all be ist, and that the agreement sales made thereafter. I can reasonably ment that that see said to pare in to the the As reduce the make it parent I am consideration. glad no soon as it The rate 2. As changes to the were a copy also are satisfied is final authorizing commission I recall, result to Baxter its with it, was It in upon Yours occurs an for I his shall and should definitely be truly, THATCHER & YOUNG 7 } Ae RDTe? Hnelosures Roy | D. argu- subsidiary. signature not to agreeing execution. agreed that the Mr. for apply upon. might dominating form shall companies agreed earlier its of modified apply you to resolutions paragraph objection company sending as he Thatcher to be pre- inserted settled. AGENCY THIS. BROWNING Party AGREEMENT, COMPANY, of the AGREEMENT a First Utah Part, made AS MODIFIED by and corporation and BROWNING between of Ogden, & aMS J. M. COMPANY, corporation having its principal place of business Louls, Missouri, the Party of the Second Part, NTR ntered signment first now the Under date of of and change into part desired lst an guns to to June SE the. parties other merchandise by the that agreement. party L8, agreement of the 8. the a Utah in St. Hg 1962, agency the ER & M. Utah, with respect second part to for hereto the party. sale. con- of the It is IT 18, THEREFORE, soir ora AGREED that on and after day of lay, 1969, the said agreement shall be as follows: 1, The party of the first part has appointed, and by these presents does appoint, the party of the second part as its authorized agent for the sale, on and after the lst day of May, 1969, on commiss sion, of Browning guns, gun parts, gun cases, magazine plugs, gun blueing, oil, powder solvent, and Similar articles, in the United States of America and Canada, and in such other places as the party of the first part may hereafter designate in writing. 2. The party of the first part agrees to consign to the party of the second part, at So. Lote, Missouri, while this contract shall continue, such Browning guns and other articles mentioned in paragraph 1 hereof as the latter may require to meet the demands of the trade and to maintain a suitable stock thereof on hand. The price to. be received by the party of the first part from the party of the necone part, after such property shall be sold by the party of the second part, shall be the actual cost to the party of the first. part for such merchandise, including the freight and other shipping charges to St. Louis, Missouri, paid by the party of the first part, plus per cent thereof, S. under in its: the The party (a) To receive (b) To take terms custody. of this of the second said agreement, proper part agrees property when care of all as followss consigned thereof while (c) To pay expenses incidental to property, and to waive first same part ' (a) To make 411 reasonable, the written (e) To ‘commissions for the the and sale of (f) To keep all proceeds (zg) To make out and (h) To (4) To maintain of those with any rents, sell except not licenses, consigned other under consent sell contract for enough more therefor by the party of pay all licenses, rents, and ee safe-keeping and sale a claims against the party to elon and therefor, all the all the efforts similar articles of party the terms the property of this of to other ach at the sell the to the excliu- the first agreement, consigned under part. this than the net amount to be received the first part, as above stated, to expenses, charges, compensation and handling and selling of said merchandise, merchandise as herein to the ag herein provided, and the doing of all things herein provided to be done by the party of the second part; and to accowmt for and pay over and deliver the said net amount to the party of the first part for said merchandise when sold under the terms of this agreement, the full charges, Compensation, commissions and expenses of the party of the second part for handling said provided, and the doing of all things herein provided to be done by the party of the second part to be the difference between said net amounts and the gross amounts received from the sale of said merchandise, and distinct from its other business. of render party of the first part on or before the 1lOth day of each month, and oftener if: requested, a full and complete report of sales made during the preceding calendar month, or since the last report made; and to accompany said report with a full settlement of cash in accordance with this contract for all such articles sold, guarantee, and it does at its own hereby guarantee, the payment in full of the accounts representing sales of such property made by it on credit, but it shall not be liable upon any such guarantee in case any account shall not be collected by reason of the fact that the debtor or debtors avoid payment thereof by reason of any defense or offset, or counterclaim against the party of the first part, expense shop and to make all such alterations and repairs convenient or necessary in selling such property property a pak CARES as may be 4, It is further agreed and understood. that the to be supplied hereunder is to be consigned simply and. that the title to and ownership of all such property con~Signed to the party of the second part under the terms hereof, and all proceeds of the sale thereof, shall remain vested in the party of the first part, and be its sole property and subject at all times to its order until the full amount to be received by it for such property, as herein provided, shall be received by it. until and Se This including contract the Slst shall day remain of in December, force 1939, and effect and it shall thereafter renew itself for successive periods of one year each, subject to the right of each party to terminate it on any December 31, by serving written notice upon the otner party of its intent to so terminate it not less than thirty (30) days prior to the date of such cancellation. 6. The former agreement shall apply to all gales made by the party of the second part thereunder and to and including the 30th day of April, 1939, and the agreement herein set out shall apply to all sales thereafter made by it. IN WITNESS WHEREOF, the party of the first part has caused this instrument to be executed by its officers there unto duly authorized this day of April, 1949, and the party of the second part has caused it to be executed by its officers thereunto duly authorized this day of April, 1959. Signed in the presence of? Je Me & Me. Ss BROWNING THE FIRS? COMPANY By PARTY OF COMPANY PART Pies ya sy ‘Sas Be sb eRe RS ‘ J 2 ‘ * t= hae! 2. ee C4 emer Gb bea.3 we Latte wet Se Le ry "y C 4 Pe se eet £14ete Tp £3e APR Vee ce a ee vie Se Wine? we THATCHER ROY D. THATCHER LE ROY B. YOUNG PAUL FIRST THATCHER : 2 Mi ® First & Ml @ S rs) Br Security Og rden, OV ming Bank BUILDING ft OZ 4 9 959 Comp Bye!Any Building Utah Gentlemens: Re We enclose of suggested I thought at but YOUNG OGDEN,UTAH March J & LAWYERS SECURITY BANK that for changes in first that method can be avoided will not cause offered 7 y your Agreement consideration three a number by the method confusion. I of difficult have used. problems I believe I have noticed under the old contra confusion arose because transportation chargs: were not treated as cost to you on which the wri be figured. That seemed copies the contract with the Arms Company. I would rewrite the whole contract FM prepays transportation be adjusted to not to harmonize charges and with bills them t hat Sts. up te which the latter some LOULS would act you. that Accordingly I have changed the contract so that these expenses will be treated as a part of the cost. I believe it will be easier to keep in mind and the rate of write-up can, of course, which and a there at all isnot think I fit. have written the automatics single rate of is a separate paragraph provision for about royalty since, for Arms for Si appropriate all the other two in two forms, are treated and the over-unaers write-up used, and the other in provisions each. I have said the reasons I explained, it TI Company to pay a royalty. are selfexplanatory. Yours truly, Roy D.y Thatcher Octo -*Oat iNP sie“Pe roy ore > my o we? ates e “Sgt et Ty v7 i iF % es ae oho ale sty @ rs am LEY ee et Ce whew Be. 4 9 —— we a bts | i ag e! | @As@ by ae ety % aS “Oe 294 ca es .-) ? ey ey 2 f 8: . t Ie + i ee “*~< e = UY oe i+ be ad J i‘deaboel be wan 3S keh A od Ps » h LETCTO. Ty ret wegen *% en : +¥ tee me ae ¢t * 4 es Sherine if abn Wa our 2 Lor: bal ee is Bee 4 oboe “| a4 ULtae why | a a es ft tae t Sin ~~ bid = are & pag . wae oO ¢ On ¢ bak id hd o 5 a | teed dhe Sg ee pie he VO he wi sa) S Be Re Pema in wee z * = J ee Ye | ee % fn rok ° 2 7% At Lu, & ry balked Tee SO 2 1 ue +t "a 7 a BBA naa wher sles i _— st} is Eg bs Litt she Tote we te. 2 e4 ay ele Lore Aecys i ve swe « 5iePhy Hy or nS fies ads rtWY| % or 14 Ly ag eRe whet o> “iy O¥W eh dla all ne ee EA eec% Or ie SLO PC » OY et? dla de mf * Ye ae © re also hf ale 4 +R to oo we¢ mm, . ed 1 * v Be wi 7% 1 C eea OF 11so been et) er or 7 a Le: e mit ru ew a | 8 tS e AE : a he have “hy we dk , ‘ *» ,," we he f% a ale nl oe | te tron vs ee ‘he, gy et ~ “ye cf sssure A> Tn dl j ee Lae] " Teo Gee ell ave ts baA ObD e ¥ sa ’ | €; ae } sd =e eR Pa" Mey i ev ttn: 3 a + t I etySS. ee * So me %4 é EK] Laika | 47 iLO . by = J bd aa mary ome VW ae be gen Ye * See 58J a) = k “4 4 O ois moO seis ~ ct no P in ol ade Y |ae 7 oat oe } ry i 3 y+ i 3 +¢4 Ce & ‘ tad ta ie tt * oy ey 7 ag Naat Nad edie St ae hc f } t nt L egard, — noth i @& else refor * you to Tt +o d. “ bi & iS i e>a we “~¥ > % ag | be + PR . a5 ; @ a? Feed ae Re wba “i & bf if »* t iy i ood we t ove —= & & tive cx 5 Tava er ex 5 tH ailsfis ie ah eee ee mt ae yey et HE Lf Klob shades re sahFt?B ay rs vt @ > hueiSake ‘- et dvg dia Se¥ Bad : m9 si OUT em as > iP ca re *, ei P| t % Z s ? oon es bo ow re COO tyes a as her | or ey es 1ey Rok, to me ihe a vay th y TG 6 We Bay FORE ee ; sa°4% 42 ¥ Ait worst rill ‘tr ue * rea ae Ho % rus t 2 . £§2 25 bens at e bs | a iV +o i Ca > eer * Py, ee ae <r de Z00€ A4 ove wm mm - Cad de ke Sanco ¥ 1 7% ae ae hee ey Ste ey Dy %. i en © ES ok 5 ng > me eM % a he a = ad 116 La ¥ » k e nc. os hes , and a| oe Lave ¢ connected OM wn | nO THE ee CLASS OF SERVICE COMPANY WILL APPRECIATE SUGGESTIONS FROM PATRONS ITS CONCERNING ITS above = Niche Letter NL LC = Deferred Cable NLT = Cable Night Letter 4 R. Office, 27. SERSEJ J.C. WILLEVER FIRST VICE-PRESIDENT CARLTON NEWCOMB CHAIRMAN OF THE BOARD B. WHITE PRESIDENT The filing time shown in the date line on telegrams and day letters is STANDARD R122 = = Day Letter DL NM = Night Message or pre- Received at sa SYMBOLS | gram unless its deferred character is indicated by a suitable ceding the address. A: | ay X This is a full-rate Telegram or Cable- symbol 1201-S SERVICE TIME at point of origin. 2406 Washington Ave., Ogden, Utah STLOUIS MO 6. Ship Radiogram AL Time of receipt is STANDARD 6.0 0G} a TIME at point of destination. 6 pl | 4% 1507 Rif > ii 3 ~, yi #1 Wika abt ia” CET ey Ay WESTERN UNION ALONE SERVES 89% OF THE PLACES j Le Ne HAVING +4 i TELEGRAPH Sc OFFICES FORMAL wu fF -4 EE wt Oe Q E rT ‘ kD < iv CLASS OF SERVICE DESIRED DOMESTIC ORDINARY URGENT RATE SERIAL DEFERRED LETTER NIGHT LETTER NIGHT LETTER SPECIAL SHIP \ 1206-8) . SERVICE RADIOGRAM Patrons should check class of service desired ; otherwise the message will be pene company BROWNING CABLE TELEGRAM DA ¥. ~ MeS. i, _. Charge to the account of ten pati ordinary ines rR. B. WHITE PRESIDENT NEWCOMB CHAIRMAN CARLTON OF THE BOARD J.C. WILLEVER FIRST VICE-PRESIDENT é October 6,1939 ™ wat ~Y Wer A “Tia? 3 > ae b Y y rea \ wbadete sole + Bs D icad oh } A ok ENS ACCOUNTING INFORMATION Send the following message, subject to the terms on back hereof, which are hereby agreed to TH. CHECK TIME FILED ( cablegram. J hod TI? A ~t ba 2 ead ARTS BS: “ee de Sadobb Bande doowte te Eh ft \ ‘ L*) sa THE — COMPANY APPRECIATE SUGGESTIONS This is a full-rate Telegram or Cablegram unless its de- ferred character is indicated by a suitable symbol above or preceding the address. R. B. WHITE PRESIDENT Received at Main Office, 2406 Washington - M A / TOUR=GH BROWNING y, RETURI MI iJ PATRONS TIMKat point of origin. Ave., Ogden, WASHINGTON DC 5 Utah CONCERNING ITS ij tO SiLeuis. | ( DI UNION ALONE SERVES 89% OF THE PLACES Time of receipt is STANDARD IC049 Ubui AFT HAVING NM = Night Message — @ ©LC= Deferred Cable NLT = Cable Night Letter J.C. WILLEVER FIRST VICE-PRESIDENT RUSSEL Le WESTERN #3. symsoLs NL = Night Letter a 1207P EHIS 1201-S DL = Day Letter f% RECT SERVICE [_ aa BS VING ITS NEWCOMB CARLTON CHAIRMAN OF THE BOARD The filing time shown in the date line on telegrams and day letters is STANDARD t FROM WESTER UNION CLASS OF SERVICE = WILL TELEGRAPH OFFICES ae Ship Radiogram f" TIME at point of destination. 5 sav |0 50 THE DS CLASS OF SERVICE WILL APPRECIATE SUGGESTIONS FROM ITS Telegram or unless above NM = Night Message de- i{ R. B. WHITE - PRESIDENT ( NEWCOMB CARLTON CHAIRMAN OF THE BOARD The filing time shown in the dete line on telegrams and day letters is STANDARD A 23 DL=GH WASHINGTON BROWN N == TIME at point of origin. Time of receipt is STANDARD 9.9 Oli DC 3 1127A NL = Night Letter LC = Deferred Cable NLT = Cable Night Letter J.C. WILLEVER FIRST VICE-PRESIDENT Received at Main Office, 2406 Washington Ave., Ogden, Utah IKH85 OB6 ) or pre- ceding the address, aye SYMBOLS DL = Day ay Le Letter dicated by a suitable symbol 7 | Cable- its 1201-S SERVICE LS ferred character is in- Mi ITS CONCERNING PATRONS is a full-rate This gram COMPANY Ship Radiogram Bie la TIME at point of destination. 3 AM 10 28 Ga. Z N= TAX |MATTER REOPENED SO REMAINING HERE. HANDLING TREATY PROBLEM WITH RAFTER VIA TELEPHONE AND WAebie WILL PROBABLY rel EPHONE YOU TODAY OR TOMORROW REGARDSS WPA J E RUSSELL THE QUICKEST, SUREST AND SAFEST WAY TO SEND MONEY EA LD IS BY eed TELEGRAPH OR CABLE “ HOWASHTON™ DIRECTLY OPPOSITE OVERLOOKING UNITED WHITE STATES TREASURY HOUSE AND PARKS WASHINGTON,D.C. OTEL WASHINGTON PENNA “ HOWASHTON” DIRECTLY OPPOSITE OVERLOOKING UNITED WHITE STATES TREASURY HOUSE AND PARKS AVE. ~~ ATIS5™ STREET WASHINGTON,D.C. ASTIINGTON “ HOWASHTON” OVERLOOKING WHITE HOUSE AND PARKS WASHINGTON,D.C. iy OTEL WASHINGTON oat PENNA AVE. “ HOWASHTON” DIRECTLY OPPOSITE OVERLOOKING UNITED WHITE STATES TREASURY HOUSE AND PARKS 38. ATIST™ STREET WASHINGTON,D.C. SUPPLEMENTAL AND MODIFYING AGENCY AGREEMENT THIS AGREEMENT ese a are COMPANY, BROWNING Party of the Firs it Part, corporatio nN having tts p .e@ Party Louis, Mis souri, by and betw os Ti J 7 e M & oration of Ogd Lern, Utah, | BROWNING ARMS COMPANY, = of pa. place Second or business Part, & M w S the a Utah in e St. ry e 18, 1982, the parties hereto agency agreement with respect to the conby the party of merchandise und other signment of euns the first part to ea party of the second part for sale. It is now desired t nge that agreement in the particulars following. omnia aren. i contract of Browning gun blueing, originally written. plugs, authority of the is extended to oil, guns, gun powder party of the capras the parts, gun cases, similar and solvent, and Canada, and in such o part may hereafter desig paragraph one shall remai in the United States of America places as the pares of the i S$, re in other in writing. Paragr 2)- @ mAB e to the party of the shall this contract gun cases, of on magazine and similar articles, of the trade demands hand. ; e as and to e paid by the The provisions cost to the party the freight or Sines b. may the latter be received t er party party by from the part shall be sold actual The plugs second of the : powde ! uire suiteble by the to meet the stock there- party of the first such property shall be the part, second after pa first part, plus two with of the first part for such merchandise, other shipping charges to St. Louis, party of of the this paragraph %, respect to to be received by the party of the first part shall y to merchandise hereto fore consigned for sale but not agreemente supplementary and modifying he date of this Alternate for Paragraph 2 to the party this contract and c the first part ag of 2 Second part, at St. Louis shea continue, such Browning;: oil, plugs, gun blueing, agazine Similar a cles, as ra demands to he trade e price on hand. part from the party be sold sei he over-under part for Ke) FO shipping of the h party Pb 'tS OM 3: Fh thereof re er-under S St to to St. : second be sold by cost to such the ¢ paid the party part for the party of over-under the party of the of the or by % thereof. OR tes by prox be, except * the 11 5 freight Missouri, received the- actual including Louis, plus be of shall the the first guns, second first part guns, including the freight or other shipLouis, Missouri, paid by the party of the [te re jie mts j - ‘5 bt 4 part, price the latter merchandise, charges first The obits -s the and to maintedn a to be received by the pa of the second part, att party of the second pa actual cost to the je The provisions of this par to the price to be received by the shall also apply to merchandise hers ee put not sold agreement. under in its at the. date this ° when the consigned thereof custody. (c) : to waive (d) To incidente Soe 8 of s pay al make Wd Fe) Ege ses laims all and not to sell any other on of those consigned under except with the written consent Keeping against reasonable ; of ents, and the first and e ef: orts ar article arms of a the party of of a while all other such party (@) = Fo ra enough the a sell - more party Br the ’ thsn of the property the first net pai ses, <7 consigned 2 amount charges as to A: under t “ be : hi receive mpehsation an fd rare! handi : s S€ 9 provided herein for to aceount the party sold under the , ras mpi com— tons and expenses of 8 party. of: ' 1 part for handling and sale of said merchandise as herei orovided, ths doing of all things hers p02 ded to be done by the f the second part > the difference between said net the gross amo an}lac es wer be oe wk oF make 4 ro out and render eS to the party before the 10th day of each month, full and complete report of sales - eel onds month, Pe (h) in full ty mad r su Nn CD << HS se ae4 ae such To guarantee, a and corinne it does foe a J yr ama m of articles here representing of the accounts y Lt on eredit, but 1 shall a rantee in case any account she 211 not debtors or 2 offset Bi geen: suitable may or LH} & J (DD <j - Fh : t | C4 _ “i fcr Se “A a) tS 3\ Ls 3 fe ¥ Ee F - t~ ct O 49) bt) Of ao * CC i - © FS a9 © [3D ON CO rt convenient to all repert i : for last settlement cho and the full BS ek shop ‘laim since Si pouneee eae or with MIS wold ave report be tSS be WHEREOF executed the by parties their hereto officers have . 1989, ap a a niet BROWNING First OMP ANY BY a BY Party of the caused thereunto a COMPANY Part a Ste Louis, Moe October ll, 1939 ct e Mr. Me c/o Je which Enclosed is copy of explains itself, As < tA C suggested sed there 1t letter in Washington might be epetition of well to Mr. and for us Thatcher briefly to dis consider =) ie advisability of changing from our present onsignment method to an outright sales plan to uU he Arms Company and thus better fortify ourselves Sid © C Co a one 1 the that might present decide our present regime our or present experience some subsequent relations are not "arms length" transactionse Roy seemed to feel this method was considerably safer than our present one. I have only: £3 . fully in mind, fe he after 2 the = 4 1 | handled. 727 7 of course, law s suit “wt and following such a plan : Eamon 2 ne Sa subsequent period is « = WLoN fi rae fa), vintere 7" October Mr. Roy D. Thatcher, atehee ars> ae aniF Ci Bank Ble ees <9 je ee i have decided compromise with Mt. not to discuss our proposed Hope here, I cannot see how such a discussion would help us at this time and 1% may serve to remind him that the four year period since their last audit berun to operate Gfeuinat the Government as at the first of this month. Even tho sh he promised me that no cic ther audit would be made until vie lawsuit v settled I think we may as well let the washer. rest until we hear from Washine tons With kind regards, Sincerely yours, Vice President 11, 19% Ste Louis, October 7, Vre M. Ae Browning, c/o Je Me and Me Se Browning Ogden, Deer Utah Moe 1939 Co., Boyss This will briefly review the tax sede steal in Washingtone As you know the lawsuit was referred to the Department of Justice and so we started there. That Department took the firm position which it still maintains that the Statute of Limitations runs against us and we are, therefore, out of court. The Department of Internal Revenue took and still takes the same position. Roy states he is confident that he could get a favorable decision from the court that the Statute of Limitations has not run against uSe For a time it looked as if this one point would be tried separately from the balance of the suit. Law suits are uncertain, of course, and even if we won the delays, plus expensed. After dickering about which we veloped SS oot nent of Just attorney not be first round there several days it called you might be conversation in - . After we made Le ne. Snip accepte anc fter z the would looked as acceptable. Zimmermen's be appeals if the and first further offer This suggestion deoffice of the Depart- offer in writing we were told by Internal Revenue that it simply listening to the y Roy agreed that the Government because it bound he Government in the cordingly withirews reasoning of that could not accept such future and the offer We were told hey would not consider any kind of compromise at all on the law su gee Os because of the firm position they took on the Statute of Find cations and they refused to give us a tax ng on the period subsequent to the law suit until after the law suit 1 out of the way. After some more jockeying we finally made the a offer, copy of which is enclosed, and which I discussed with you on the telephonee We were inclined to feel that this offer would be acc Bi st : ame oane to both Departments base for the period being helpful in getting and the subsequent would Revenue to L1, serve the as a Department law suite precedent,at to fix this Roy and Gordon will discuss this matter with you more in dé upon their arrival in Ogden and so 1 oun not go into further They promised the matter would be expedited and not permitted to delayed, but told us it was unlikely on t+ we would get any formal cision on it in 1 less than six weeks, possibly two months of Both Departments told us that they felt inventory and the subsequent way in which transfer probably was position in court and ae eas ae filed within the two 4 simple a lot in the this hiv 219 above A is developments With as and 2 brief from a week the kind regards that we probably could transfer by that sustain frankly told us so, but they stuck on the which would not be in existence if we had year p od, etc. a rather of conferences shape, legal our original we had lived and : telephone other men and best statement of what calls and planning of will intensive explain wishes, work, to may but yYOUe to th that October The Attorney General Washington, of D. the Re; C. United 4, 1939 States, Browning Arms Company VSe Thomas entitled payment Browning Arms Company action with prejudice, of Thirty-five Thousand Je Sheehan, Collector offers and as to dismiss the fully settled, Yours truly, Dollars ($35,000.). above-= upon Roy De. Thatcher Counsel and Attorney-in-Fact. RDI/n Address: Ogden, Utah THE one OF SERVICE COMPANY a cening the address. APPRECIATE SUGGESTIONS FROM ITS PATRONS ; ? t. ‘ § E = t $ eS “*€ 5 ~ ae oe R. B. WHITE PRESIDENT NEWCOMB CARLTON CHAIRMAN OF THE BOARD ait cig Nun? Tt 8 See j <3 = 7 = 2406 Washington Ave., Ogden, t a " f rm tf a : : “} tt 2sae i¥ 2 S 845Se as mT ry ; j :. aut WP ? LC = Deferred Cable NLT = : Cable Night Letter J. CC. WILLEVER FIRST VICE-PRESIDENT Utah 1201-S SYMBOLS DL DL =DayE ay Le Letter NM = Night Message NL = Night Letter é | Ai! SS SERVICE : 2 Se ITS | | The filing time shown in the date line on telegrams and day letters is STANDARD TIME at point of origin. Received at —_ CONCERNING Je This is a full-rate © Telegram or Cablegram unless its deferred character is indicated by a suitable symbol above or pre- WILL * ‘Ship Radiogram Time of receipt is STAN DARD TIME at point of destination. 959 OCi | AM 7 iy >> ‘ la 43 ; PE) $4 yf Acts cs Saat Wiit. feu O COSY ELON 1 ts 2 o 3 EE NPAMDAALCNH ie aim DOr} LPiwWwWi Kea foot BEe=' THE QUICKEST, petri Si SUREST fa AND SAFEST WAY TO SEND MONEY IS BY TELEGRAPH OR CABLE i At Lwtf | VULAG 3 | at a: aa ak jae i} THATCHER ROY D. THATCHER LE ROY B. YOUNG PAUL & YOUNG LAWYERS SECURITY BANK FIRST THATCHER BUILDING OGDEN,UTAH september Honorable &.5, washington, D. 22, 1939 Eccles c/o Federal Reserve Board My C, dear Marriner: = Gordon fer Washington, i should x ; noth. think Baxter where that we we Ret Personal and I are leaving have an should holding in appointment be through on companies the morning on the the 28th 27th, or George expressed the hope that we might be able tO see you to discuss the surtax on personal holding companies and to arrange with you to present the sroblem to sr, Hanes, Wells and Baxter are preparing a letter to be Signed by the J, MW, & kh. &, Browning Company and another in identical form for the iecles Investment Company, The latter we will get to you for your signature as soon as possible seattle, after our so that We shall 1t arrival. is not to him, but Wells and Baxter with him, and I am satisfied his approval, Yous look Gordon Baxter J. M. & M. S. Ogden, Utah has already to present with pleasure Yours truly, Roy Thateher D, , Browning left for the letter to seeing have hed extended conferences the letter would meet with forward RDT:T CC: CG: George possible Company ~~ x Pico 4 CUE COPY tee ay M. & M. S. BROWNING CO. OGDEN, UTAH September Honorable dgohn W. Hanes, Under Secretary of the Washington, 0. C. 22, 1939 Treasury, Sirs In line with your desire to have taxpayers present their views regarding suggested changes in the present Revenue Act, we desire to present our position relative to surtaxes now imposed on personal holding companies: The first surtax on personal holding companies was that imposed by Section 351 of the 1934 Act which provided that upon the undistributed adjusted net income of every personal holding company a surtax of 30% of the amount of such income not in excess of $100,000.00, plus 402 of the The reason for amount thereof in exeess of $100,000.00 would be levied. the enactment Means Committee of this report, law, in an quoted ae the most prevalent ehenged the rate “Perhaps is contained Ways extract from the of tax avoldance follows: form and practiced by individuals with large incomes is the scheme That is, an individual of the “incorporated pocket book". forme a corporation and exchanges for its stock his personal hoidings in stock, bonds, or other income-producing property. By this means the income from the property pays corporation tax, but no surtax is paid by the individual if the income is not distributed’. The adjusted varying 19236 Act net rates The income not in exeess income covering from 8% to 46%. Revenue Act of #11 1937 of tax applicable amounts provided in excess that a1] to undistributed of §2,000.00 undistributed with | adjusted in excess of $2,000.00 would be taxed at 65% and all amounts of $2,000.00 at 75%. ‘Under all revenue acts the surtax on personal holding companies has been in addition to the tax imposed on ordinary business corporations. While the general purpose of the tax is to reach corporations which are formed or availed of te prevent the impositionof a surtax upon the sharenolders thereof, the law makes porations which RAP PSE to come no exception for bona within the definition fide business of a personal corholding company. fhe income to be distributed by personal holding companies is net income, as defined in Title 1 of the various revenue acts, lese certain There are deductions, arriving at a total termed “adjusted net income". sertain deductions from adjusted net income which are made before arriving at undietributed adjusted net income upon which the tax is computed. Honorable John W. Nanes 2. Among the deductions from adjusted net income Act. of 1936 were losses arising from the sale allowed under the Revenue or exchange of capital assets, disallowed by Section 117(d) of the Revenue Act of 1936. In other words, the difference between the 92,000.00 capital net loss Limita-~ tion and the amount actually sustained net income for the purpose of figuring as a deduction net adjusted 1935 phase in computing was the undistributed income. allowed surtax. adjusted The 1937 Revenue Act eliminated both and 1939 Revenue Acts remain the same, The of 1936, in excess porations sonai law the of elimination of allowing of the coming holding of the provision, corporations net income effective to receive under the the benefit have, paid, not of of the necessity, Revenue of capital $2,000.00 limitation hae worked a real within this classification. Since the companies 20% of these deductione and the insofar as this particular concerned. is to reduce the adjusted There was also allowed Act losses hardship upon year 1934 all distributed their corper- earnings and 28 4 result have not been able to build up a Surplus account. When a corporation sustains an excess of non-deductible capital losses over the 62,000.00 Limitation this difference is applied to reduce surplus and although there may be taxable income this reduction ean have the effect of reducing earned surplus to the extent that a part, or possibly all of the dividends are taxable in the hands of the recipients, stockholders, with the result that a dividend paid sredit and the personal holding company surtax is assessed. is not the allowable it would seem fair that the law should be changed to allow personal holding companies the benefit of these excess losses inasmuch as under the 1939 Revenue Act they are the only class of corporations still subject to the $2,000.00 capital net loss limitation. (Effective large tax, or the after the year of tax 1939). The effect of not being able to receive the benefit of these losses, for dividend paid credit purpeses, is that personal holding companies may find themselves, due to circumstances entirely beyond their control, in the position their been of paying Title 1A sustained Cireult or loss Another net a income, when, the company. serious problem by Court of Appeals to a corporation as in fact, a matter of whole fact, has arisen as an outcome the an actual paid loss upen has of a recent decision wherein the court decided that the gain arising through non-taxable or non-recognized transactions for income tax purposes must, nevertheless, be used in determining whether or not dividends are paid out of earnings accumulated since March 1, 1913. The court decided that the words “earnings or profite* are words in common use and are to be given their plain, ordinary and commonly understood meaning in considering earnings or profits. It was alse stated that Congress net income recognized && commonly was aware of the distinction between net income or profits. and the provision that certain gains or profits in computing taxable income shows that Congress understood they were nevertheless gains and taxable should not be realized that Honorable fhe John W. Hanes of effect ~- this 3. upon all therefore, may decision but corporations, especially personal holding companies, is that reorganizations may be effected which are non-taxable under the Revenue Act and a company holding securities in the reorganized corporation must, for the purpose of determining whether or not earnings are available for dividends, either add to or deduct from surplus account the non-recognized gains or losses arising out of the transactions. A corperation, in itself find the position of having a taxable net income which is entirely offset by 4 non-recognized If the surplus account at the beginning of the year was not suffiloss. siently large to absorb this loss a dividend paid eredit would not be allowed the corporation with a resulting high surtax. | This decision is very harmful to personal holding corporations inasmuch as the undistributed profits tax as such is eliminated after the year 1939 and corporations outside of the personal holding company . are not affected. classification allow the It would for eredit computation seem when of that the some provision non-recognized dividend paid should losses credit. are be made given in the law consideration to in In our judgment personal holding companies should be allowed the same deductions for capital losses as are now provided for in the case | of individuals under the 1939 Act. Respectfully J. By M. & M. submitted, &. BROWNING COMPANY Vice-President or ul 4 ) < rs kK }- a — O O O < aa) 2—l QO J o = Oo ke C.PA.,A.C.A Le LJ O B.SCHOLEFIELD, SEYMOUR LYNN o Ww 0 at Ef in > fa ad ca nm Ld a O Tr O U) J. OFFICES BOISE,IDAHO — SALT LAKE CITY, UTAH SAN FRANCISCO —LOS ANGELES AND WELLS,C.P.A. FIRST E—.BAXTER,C.P.A SECURITY BANK OGDEN, > Ws 13 =f bh NEW > oy Wil jL » we we whud J Arce 5 > n@ fe ww usse Ecc] ar &7 > | RPs £> fe WU ewe ~ + hd 4 2a ad a al ‘ LNG date a! a & Ome ve ome ,tgt re) oOo” Ja 31" memora te wWwrA BAA VALLE s | . ; ¢ 4 ake & i | a £* in ~ 2 a ay & o fJ di w i cr ¢® 73 as VJ cc Us hs 4 h 0 & i cy 2 tan! a) Nn re3 é “> r “ew a! ‘entiFf ts Ls WW 5* ai wa. be corporate ~ ne? . + fs WEL ~ 4 @ Ov § ee TAT-4 ,_a r -auex7) vu 6 we Be | iL ‘ a CALIF. YORK CITY — CHICAGO WASHINGTON,D.C. Attached ™T OAKLAND, AGENCIES UTAH nher ssbJ BUILDING 4} 4 it . 3 of e WL io. L& t as TENTATIVE september MEMORANDUM RE:. SURTAXES ON PERSONAL HOLDING 13, 1939. COMPANIES: The first surtax on personal holding companies was that imposed by Section 351 of the 1934 Act which provided that upon the undistributed adjusted net income of every personal holding company a sur- tax of The reason plus Ways 30% of the amount for enactment 40% of the and Means amount the of such thereof Committee income in of excess this report, not law, is in excess of quoted $100,000.00 contained as of $100,000.00, would in an be extract follows: levied. from the "Perhaps the most prevalent form of tax avoidance practiced by individuals with large incomes is the scheme of the “incorporated pocket book". That is, an individual forms a corporation and exchanges for its stock his personal holdings in stock, bonds, or other income-producing property. By this means the income from the property pays corporation tax, but no surtax is paid by the individual if the income is not dis- tributed". buted adjusted varying The 1936 from 8Z to 487. net rates | Act changed income The the covering Revenue Act of rate of tax provided that all 1937 amounts adjusted income not in excess of $2,000.00 amounts in excess of $2,000.00 at 752. Under all revenue acts the applicable in excess would be surtax on all of taxed to undistri- $2,000.00 with undistributed at personal 65% and all holding com- panies has been in addition to the tax imposed on ordinary business corporations. While the general purpose of the tax is to reach corporations which are formed or availed of to prevent the imposition of a surtax upon the shareholders thereof, the law makes no exception for bona fide business corporations which happen to come within the definition of a personal holding company. | The income to be distributed by- personal holding net which companies is net income, as defined in Title 1 of certain deductions, arriving at a total the various revenue acts, less termed “adjusted net income". fore net There are computed. Revenue capital In certain arriving other Among also come words, the net of the and allowed 20% deductions undistributed from deductions adjusted adjusted from adjusted income income net upon income are which made the allowed tax be- under is Act of 1936 were losses arising from the sale or exchange of assets, disallowed by Section 117(d) of the Revenue Act of 1936. limitation adjusted at amount a deduction income as the difference the for adjusted The 1937 between actually the purpose net in Revenue the sustained of computing CERTIFIED PUBLIC capital allowed the & BAXTER ACCOUNTANTS both to surtax. undistributed eliminated SCHOLEFIELD,WELLS was figuring income. Act $2,000.00 of net reduce There adjusted these loss net the was in- deductions the Se and the 1938 and 1939 is remain the same, insofar as this of Act 1936, The elimination of the provision, effective under of allowing corporations to receive the benefit of in law Acts phase of the Revenue cular excess of the $2,000.00 limitation has a result have not been able to build up It would seem fair the porations coming within sonal holding companies parti- concerned. worked a real this classification. Since the have, of necessity, distributed a Surplus hardship the Revenue capital losses upon cor- year 1934 all pertheir earnings and account. When a corpora- as tion sustains an excess.of non-deductible capital losses over the $2,000.00 limitation this difference is applied to reduce surplus and although there may be taxable income this reduction can have the effect of reducing earned surplus to the extent that a part, or possibly all of the dividends paid, are not taxable in the hands of the recipients, the stockholders, with the result that a dividend paid credit is not allowable and the personal holding company surtax is assessed. personal holding companies under the 1939 Revenue Act subject to the losses, for year 1939). panies may trol, tax effect due to in the position of paying loss has sustained themselves, their been Title be purposes, being credit upon should net loss limitation. not paid find law capital of dividend paid actual $2,000.00 The that changed to allow the benefit of these excess losses inasmuch as they are the only class of corporations still 1A net able is receive tax, income, the when, the (Effective after the benefit of beyond their that personal holding or fact, whole circumstances a large by to company. entirely in as a the matter of fact, these com- of an con- the Another serious problem has arisen as an outcome of a recent Circuit Court of Appeals decision wherein the court decided that the gain or loss to a corporation arising through non-taxable or non-recognized transactions for income tax purposes must, nevertheless, be used in determining whether or not dividends are paid out of earnings accumulated since March 1, 1913. The court decided that the of decision words “earnings or profits" are words in common use and are to be given their plain, ordinary and commonly understood meaning in considering earnings or profits. It was also stated that Congress was aware of the distinction between net income and taxable net income and the provision that certain gains or profits should not be recognized in computing taxable income shows that Congress realized that as commonly understood they were nevertheless gains or profits. especially The personal effect holding this companies, is upon that all corporations, reorganizations but may be effected which are non-taxable under the Revenue Act and a company holding securities in the reorganized corporation must, for the purpose of determining whether or not earnings are available for dividends, either add to or deduct from surplus account the non-recognized gains or losses arising out of the transactions. A corporation, therefore, may find it- self in the position of having a taxable offset by a non-recognized loss. If the of the credit year would was not not be sufficiently allowed the large absorb corporation SCHOLEFIELD, CERTIFIED to net income which is entirely surplus account at the beginning WELLS PUBLIC & with BAXTER ACCOUNTANTS this loss a a resuiting dividend high paid surtax. This decision is very harmful to personal holding corporations inasmuch as the undistributed profits tax as such is eliminated after the year 1939 and corporations outside of the personal holding company classification are not affected. to the allow It for would seem of dividend credit computation when the George S. The Hecles: Family and Controlled the members holder, This which are of are following provision losses credit. information is should are given be made in the request of Mr. given at the consideration law in Transactions property between controlling stock- does such under not taxable. treated paid Corporation prohibited Distributions some Losses arising from sales or exchanges of a family, or between a corporation and a provision are that non-recognized apply Section to 24(a)(6) of the complete liquidation gains arising 193) through Revenue Act. transactions, in Liquidation as Amounts in full distributed are treated as sales or exchanges, loss provisions of the law. and subject Distributions in in the Department non-recognized Revenue Agents of the Treasury Department advise us that has interpreted the "Young" decision as requiring that all gains or losses recorded by a corporation in connection recent the a corporation for of the in of exchange tributed in partial full payment of the payment in liquidation of a corporation exchange for the stock, thus Kind (Considered "Young® Decision) are the stock; and amounts to capital dis- are treated as in part or liquidated distributions the gain and light with distributions in kind must be either debited or credited to surplus account. Such transactions will have an effect upon surplus arising from earnings accumulated since March 1, 1913. If large losses are sustained @ corporation may not be in a position to receive a dividend Such assets, for tax purposes, are eliminated from the books or basis cf the taxpayer and are received by tne stockholder value. : SCHOLEFIELD,WELLS CERTIFIED PUBLIC & BAXTER ACCOUNTANTS paid credit. at the cost at market September 9, 193 Mr. ws. BE, Posselaé Browning Arms Company Merchandise ot. Louis, Mart Pusiding Missouri ave your letter of the 7th. ¢ will be glad t tay at the Washington, but the train, which we PROBE LY will, we shall the night of the 2 we shall be glad if = reserve rooms for. us a it time cag wot yours ever you arrive. of course, Washing ton Ve be @ about 2 pleasu Db . bis TiO is 7 sap eOora a SRE TRA STO: 8 as 3 to the c w sale you it reach. 1Fram Por i give ne Dal, ic us age Oy ES date prices wnich the: the eutomatic are. Shag. sold Remington and IL. Gon! t think of vy shall be glad to ‘ave cae u your judgment ‘in ¢ any other information that sth oceur to you. King regards! Sincerely THATCHER RDT: DEJ io we CC - Xm toy oe Ogden, Gordon Ogden, & ie Utah De Baxter Uteh browning D. yours, & YOUNG Thatcher other hears Charge to the account of Mh be den Sits CLASS OF SERVICE DOMESTIC 4+ F s a = bo A r * . Cateat DESIRED ORDINARY TELEGRAM ACCOUNTING DEFERRED INFORMATION SHIP RADIOGRAM Patrons should check desired, otherwise \ the class of TIME FILED service message will be R. B. WHITE PRESIDENT transmitted asa telegram or ordinary cablegram. CARLTON OF THE BOARD J.C. WILLEVER FIRST VICE-PRESIDENT S +3) bay “SS 8 o So ~ tee <P) ni ve 2 = ~~ Cae S 3 .*3) = © .*) nm ni’ 8 ~O) i © 7) s ~ y = S ~— +3) nm a2 bey ie) w Q ve = c> Oo it ) 8 ” w & =. Let) Send the follow i NEWCOMB CHAIRMAN _y . ain LO iar e Bue ¥3 Sie he ol ae : Se ae yy a ae Aad hind ht A bheeag aid 5. — | c.f ... h hat > OUR ~ \ } Sy 8 bik 3 I ~ i. Ty" od Eh LS TT 7 A bb MILI 7) FL ; a & diet & & ra 4 rn ry ef € wt ‘. 42 Dy THATCHER ROY D. THATCHER LE ROY B. YOUNG PAUL FIRST & YOUNG LAWYERS SECURITY BANK THATCHER BUILDING OGDEN,UTAH september 5, 19469 J. M. & MW. S. Browning Company First Security Bank Building Ogden, Utah Gentlemen: I am returning from Scholefield, M. A. Browning, a copy for my copy of the letter and Baxter to your Mr. August 15, Wells dated your fo mnelosure having files. Yours Bp? s T 1939, truly, TRATOHER Pea Roy D. & YOUNG Thatcher made Young, Blde 5 ey * 3 4 al Ae ue Dans er © in ie ming % a you sabion xp La with i. agi ae a on noc of be riot hing the ed ae 7 Se Bae crea pede Tide. 9yh Augus= Sth sd re Company ui Clar ke Le ifs Gi OGi cy urine further t¥ Ie been r POEs Scelyod, " DPOSU Sl SS Go the de ‘ has See OU *% ried f Cop Ee Ge lep & b $ i 3 ‘Fe eae we de ‘* ae Se 2 Wiley tne eoniter ence: is errenced 27 wget? hehe A AP Sd Pe Bie SS + OF ON ik is ae we WEES Giie copy of Yours very truly, 30 SCHOLEFIELD, J.B. SCHOLEFIELD, C.PA.A.C.A. CERTIFIED SEYMOUR WELLS,C.PA LYNN E. BAXTER,C.P.A. FIRST WELLS PUBLIC SECURITY BANK OGDEN, August Mir. he A @ Browning Ogden, Dear Mr. & BAXTER — SALT LAKE CITY, AND BUILDING NEW OAKLAND, CALIF. AGENCIES YORK CITY — CHICAGO WASHINGTON,D.c. 1939 g Utah. Browning: &g requested by you, we have analyzed some of the problems confronting a "Personal Holding Company" operating under existing Federal income tax laws, and have also furnished data with respect to particular reference ing sections of purposes. Company as come the (1) as year defined beginning the whole in holding 80 per year is Section be used, 402 defines centum personal 403; company after but with December if of the to 1936, a desired, for Personal Hold- its gross in- corporation is holding respect 31, if company any taxable then, for each stock ownership in- sub- 70 per during quired expira- of the not means annuities. rent), half (2) of does three consecutive per centum of the income; and more that last by paragraph than which not the exist, or until the taxable years in each of gross income is personal (2) At any time five individuals. taxable year more standing stock is stituting can sequent taxable year, the minimum percentage shall be centum in lieu of 80 per centum, until a taxable year tion of than 70 company law which At least taxable come &@ personal law The law under Section corporation if -- any for the which less holding in value of indirectly, its outby or for Gress income as defined under Section 403 portion of the gross income which consists of: (a) Dividends, interest (other (b) Stock securities transactions. (¢) Commodities (d) Bstates and Trusts. (e) Personal service royalties (other than and re- during the last half of the than 50 per ecentum owned, directly or UTAH SAN FRANCISCO —LOS ANGELES UTAH 15, OFFICES BOISE,IDAHO ACCOUNTANTS mineral, oil, transactions. contracts. than or of interest gas the con- royalties), Me. iM. more A. of Browning (f) Use of corporation (2) Rents - unless the gross income. 50 per centum stituting determining ae ae re (h) whether constituting or gas royalties, income. unless Section 404 of law, for the purpose stock ownership, the language based (1) Stock for a corporation, the stock the family and lineal descendants, such steck shall the is a personal on owned, holding directly partnership, or sisters the for of of partner. the If any be by purposes only parson an owned option by to {A} purposes of to the for personal the holding (relating to personal sonal holding the provided if, (f)(relating his this effect is company; for the make purposes use his and ancestors, to acquire stock person. such shall the stock (a) For an be of section by or 403 of - if, a (e) section shareholders), income. thereper- (5) Stock constructively owned by s person by reason of the application of paragraph (1) or (3) shall, for the purpose of applying paragraph (1) or (2), be treated as actually owned by an graph (2) owned by such individual by shall not be SCHOLEFIELD, CERTIFIED person; but stock constructively reason of the application of para- treated WELLS PUBLIC & as owned BAXTER ACCOUNTANTS by him con- owner- corporation contracts), of property (2), if, but only if, the effect is to make the amounts in referred to inecludible under such subsection as company family paragraph spouse, acquire 402 is be shall be applied in section service te the (3) by shall brothers such insofar used as owning for a series of such options, acquire such stock. (2) and 403 of has an option as Paragraphe (B) or or half blood), paragraph of te requirement only includes considered this (4) but For individual and each one as an option ship indirectly, of shareholders, shall be considered or by the whole (3) purposes option, Sidered an (whether ite An individual directly his by trust or con- company, or indirectly, estate, considered as being owned proportionately partners, or beneficiaries. or centum gross or or by 50 per the is (2) shareholder. o11, of a corporation owned, by Mineral, or more Under such determination follows: property for the pur- pose of again another the applying such constructive paragraph owner of in such order to make stock. (6) If stock may be considered as owned by under either paragraph (2) or (3) it shall an individual be considered as owned by him under paragraph (3). made to include cendants. Each it will be seen that the definition of a family is brothers and sisters, spouse, ancestors, and lineal des~ family countsas one individual in determining whether is more more than owned its Title excess of Adjusted net 50 by per not cent in than & net of five or 75 the following company a tax at 65 per cent on amounts 14 of Section adjustments: (2) There (1) Federal paid outstanding holding pay per income under Title with the stock individuals. personal LA net income $2,000.00 and income value shall must income, income-tax law company distribute 406 of the as all of law means the deductions war-profits, during the cent on amounts not in in excess of $2,000.00. be allowed or accrued of the and taxable - excess- profits taxes year to the section of a prior 23(q), (2) In liew of the deduction allowed by section contributions or gifts payment of which is made within extent not allowed as a deduction under Section 23; but not including the tax imposed by section 102, section 401, or a of such the tion sections. taxable which come, 23{q) year to for the does not computed or for purposes the corresponding use therein of exceed 15 per centum of the without the benefit of this tion 23(q), and without the deduction under subsection (b) of this section. prior ities tion to of of (3) In the either described in to an amount of the amount disallowed of a corporation organized of the corporation on January 1, 1934. No under this liability 1936, to take over the of a decedent, amounts sec- taxpayer's net inparagraph and sec- case January 1, the estate any donees specified, to assets and liabilpaid in liquida- based the liabil- ity of the decedent to make contributions or gifts to or for the use of donees described in section 23(0) for the purpeses therein specified, to the extent such liability of the decedent existed under section prior to paragraph (2) of this subsection deduction for shall a taxable allowed for which a deduction is allowed 23(a), (b) The aggregate of the deductions allowed under relating to expenses, and section 23(1), relating to depre- SCHOLEFIELD, CERTIFIED WELLS PUBLIC & BAXTER ACCOUNTANTS paragraph. be year Mr. M. A. Browning ¢Ciation, which perty owned or amount or the @qual right gulations to to ie are allo¢able to the operation and operated by the corporation, shall the rent use, the prescribed by or other compensation received for property, unlese it is established the Commissioner with the retary) to the satisfaction of the Commissioner: ated yachts, country estates, etc.) approval the to (2) That (3) Either the carried or, property on bona that if none was held Undistributed The Dividends", the in the course there was reasonable expecta- prefit; and result in a the conduct of net income means adjusted for "Consent Dividends" amounts used or irrevocably any kind incurred prior to previded consent received, for adjusted law was fide paid credit and indebtedness of 1938 See- incorpor- That the rent or other compensation re- net income less a dividend set aside to pay or retire January 1, 1934. "Deficiency of (Relates tion that the operation of the property would profit, or that the property was necessary to the business. | the use of, (under re- (1) ceived was the highest obtainable, that none was obtainable; of a business maintenance of probe allowed only in an dividend being defined in also Section 28 of the law and enables a corporation which is unable to declare dividends in cash or in property, to distribute taxable stock dividends, to obtain the tax benefits incident to such actual distribution without distribut-~ ing its earnings which would This result basic surtax and without arise from the is obtained by credit and depriving the ig upon the consent such receipt of the creating a new which based government dividends by credit which of the revenue the shareholders. is part of the of stockholders to include in their gross incomes, as tavable dividends, amounts specified in such consente, although such amounts are not actually distributed to them desire. but new credit sequent to ciency are retained by the corporation for Section 407 of the 1938 law affords covered in Section 407 of against the tax based upon the final determination of dividends are uses as law. may to taxpayers dividend distributions a deficiency under the the it made law. in order to obtain a dividend paid credit under section 27 of the law, the regulations provide that no dividend paid eredit shall be allowed with respect to any part of the distribution by &@ corporation to its shareholders (a) Not out SCHOLEFIELD, CERTIFIED which is of earnings WELLS PUBLIC & BAXTER ACCOUNTANTS - or profits of the a sub-~ Defi- Mr. WM. A. Browning taxable year - 45. or out tion accumulated of earnings subsequent or profits to February 28, of the 1913, corpora- or, in the case of distributions in liquidation, not properly chargeable to earnings or profits of the corporation accumulated after February 28, 1913. Section 27 also provides that if any part of a distribution, including stock dividends and stock rights, is not a taxable dividend in the hands of such of the shareholders as are subject to taxation under this title for the period in which the distribution is made, such part shall not be included in computing the basic surtax eredit. | in other words, in order for a corporation to receive the benefit of the dividend paid eredit the amounts so distributed must be taxable in the hands of the recipient. Handbook comments Robert relative H. to Montgomery Section 28 in his as 1939 Federal follows: Income Tax "“Zhether Seetion 26 will serve ite purpose to any substantial extent is doubtful. It will be practicable only in the case of closely held corporations. It offers no relief to scerporations which are unable to pay a taxable dividend because they have no earnings or profits but which have taxable net income because of non-deductible capital losses. Despite the fact that the stockholders sonsent to be taxed on the net income such corporation will be denied the consent dividends eredit because the law provides that the credit shall only be the amount which the corporation would have been entitled to if it had distributed in cash the amounts specified in the consents. Under such circumstances, not only will will the not amount corporation be permitted on which they be denied to add have to a credit the consented but basis the stockholders of their to be taxed stock because section 28 (h) the amount which may be added to the basis Limited to the consent dividends credit of the These provisions are obviously inequitable and should accordingly be careful that they de not taxed on a larger amount than would be allowed dividends eredit to the corporation. the under is corporation. stockholders sonsent to be as a consent "The consent dividend is taxable in full to the stockholder whether or not the amount, if distributed to him in cash, would have constituted a taxable dividend (section 28 (f-2). On the other hend, section 28 (h) prevides in effect that the basis of the consent stock may be increased only in the amount that the consent dividend is out of “earnings or profits." Thus if the consent stock is later seld or exchanged at a gain, part of the sonsent dividend may be taxed twice, first at the time of the consent, and later as part of the gain realized." SCHOLEFIELD,WELLS CERTIFIED PUBLIC & BAXTER ACCOUNTANTS Mr. Mo. A. Broming - 6, ; it appears that under all sections of the law, deal- ing with this question, that there is no way in which a corporation can get a credit to be applied in reduction of the persenal holding company surtax, except through payment of dividends taxable in the hands of the recipients, or through making payments upon indebtedness incurred pricr to January 1, 1934. if a eorperation sustains an excess of non-~deductible capitel losses over the $2,000.00 limitation, the difference will be applied in reduction of surplus and although there is taxable income in & Sizabie amount, this reduction can have the effect of reducing earned surplus to the extent that a part, or possibly all of the dividends paid are not taxable to the stockholders, with the result that the dividend paid credit is not allowable and the personal holding company surtax is assessed, in a recent decision, Commissioner of Internal Revenue vs. F. d. Young Corporation, and Comnissioner of Internal Revenue vs. lL. 0. Pierson Corporation, handed down by Circuit Judge Davis of the United States Circuit Court of Appeals, Third Circuit, the court decided that the gain to @ eorporation on the transfer of securities for stock of a controlled corporation had the effect of increasing earnings or profits available for subsequent dividend distributions. Although the exchange resulted in a gain it was tax free under section affirmed the Board of Tax grease in the earnings or Appeals profits 112(b)(5) of the 1926 Aet. conclusion that it represented of the transferor corporation. The an court in- Consequently, a distribution made in 1930 from the @¢arnings and profits of the distributing corporation, to a large extent out of the unrecognized gain realised on the tax free exchange, was in effect non-taxable, as corporate stockholders under the 1928 Act were allowed full deduction of the amount of dividends received from other corporations. The court prefit held and that the the fact transfer that it of was securities not taxable resulted did not in a definite alter the gain situation. or In this ease the Commissioner of Internal Revenue contended thet gains which are not “recognised" under Section 112(b) of the Act cannot be considered as earnings or profits under Section 115(a) of the Act. The court stated that the infirmity in the commissioner's reasoning lies in the falsity of his major premise, namely, that a gain which is not recognized under Section 112(b)(5) earnings or profits under Section 115(a). Section 112(b) Further indicates that it was stated Congress thet was aware may not be considered the very of the wording of distinction as be- tween met income and taxable net income for the provisions that certain gaine or prefite should not be reeognized in computing taxable income, shows that Congrese realized that as commonly understood they were never~ theless gains and profits. simply a definition This of the decision word aleo dividend SCHOLEFIELD,WELLS CERTIFIED PUBLIC & sets and BAXTER ACCOUNTANTS forth that merely Section distinguishes 115(a) is between My. HM. A. Browning - # 7. a diatribution out of earnings and profits and a distribution out of capital. The words “earnings or profits", ae therein used, are words in common use and are te be given their natural, plain, ordinary and commonly understood not a gain ings or which meaning. The question involved in this resulted from a tax free exchange case was whether or of securities under out meaning Section 112(b)(5) 115(a) of the Act may be declared. profits of the Revenue of which fhe Act of 1928 dividends Department within could the be considered is now following the of as earn- section "Young" decision as it relates both to non~taxable exchanges resulting in profit and also in losses. Revenue agents are going back to March 1, 1913 to determine whether or not distributions have been made out of earnings or capital in the light of thie recent decision. Most personal holding companies, including your own, have distributed their sarnings so that they do not have a large earned surplus. In the light of the "Young" decision let us consider that your corporation had, at the beginning of the year, an earned surplus of £20,000.00, Earnings during the year amounted to 5200,000.00 and that you paid a dividend of $220,000.06. Ordinarily you would not be liable for personal holding company undistributed profits surtexes. However, let us say that a non-taxable lose of $50,900.00 was sustained during the year through a transaction arising under the non-recognition provisions of the law. I¢ would then be necessary to charge surplus with $50,000.00 reducing the amount available for the payment of dividends to $170,000.00 and even though you paid an income tax, based upon your earn~ inger for the year of $200,000.00, the Government would say that a dividend eredit of $170,000.00 would be all that you sould reseive creiit for as this amount exhausted your earned surplus. & personel holding company ic, therefore, placed in the position of paying an income tax upon etetutory Title 1A income and having an entirely different amount used for the purpose of determining the dividend paid credit giving recognition to non-taxable exchanges. Extreme care must be exercised in connection with all capital losses which may be sustained by your corporation in exeess of the &2,000.00 limitation and also non-recognized transactions resulting in losses. It ie quite probable that a non-taxable reorganization of some corporation whose securities you hold might necessitate your recording a "loss" to surplus account which you have no means of offsetting with the result that a dividend paid credit will not be allowed and personal holding company surtaxes assessed. In other words, a non-resognized loss for tax purposes may cause you to become liable for surtaxes in the full amount of such lose. this GHB: ¢ connection, if please we ¢an be gail upon of any us. further Very truly yours, SCHOLEFIELD, CERTIFIED WELLS PUBLIC & BAXTER ACCOUNTANTS assistance to : you in Wry } KR Me SCHOLEFIELD, J.B. SCHOLEFIELD, C.PA.A.C.A. SEYMOUR WELLS,C.P.A. LYNN E. BAXTER,C.P.A. WELLS Pugeny Me. A. AGENCIES YORK CITY — CHICAGO WASHINGTON,D.C. 1939 Browning: confronting reference purposes. Ae requested by you, we have a "Personal Holding Company” ing Federal income tax to particular sections Company come come as The law under Section corporation if -- any for the (1) 402 year defined in sequent taxable year, tion three of than 70 company taxable is Section personal 40%; but means that stituting rent), annuities. the minimum defines a Personal if holding consecutive taxable the company corporation to any taxable then, fer each percentage shall be Hold- inin- is sub- 70 per which less lieu of 60 per centum, until a taxable year during of the last half of which the stock ownership reparagraph (2) does not exist, or until the expira- per centum of income; and standing not more data with respect if desired, for At least €0 per centum of its grose taxable as centum in the whole quired by analyzed some of the operating under exist- lawe, and have aleo furnished of the law which can be used, @ personal holding company with respect year beginning after December 31, 1936, law CITY, Utah. problems ing LAKE Browning, Ggden, iy. — SALT year (2) more the gross At any time than 50 per years income during centum stock is owned, directly than five individusis. in is each of personai the last in value hoiding half of the of its out- or for Grogs income as defined under Section 493 portion of the gross income which ¢onsiats of: of (a) royalties or indirectly, by Dividends, interest (ether Stock securities transactions. (other than and mineral, o11, commodities transactions, astates Trusts. Personal and service UTAH SAN FRANCISCO —LOS ANGELES KL, AND OAKLAND, CALIF. UTAH 15, August OFFICES BOISE,IDAHO NEW OGDEN, Mir, BAXTER BUILDING BANK SECURITY FIRST & ACCOUNTANTS PUBLIC CERTIFIED contracts. than or interest gae the con- royalties), Be more of the gross (f) Use (g) Rents determining ae ag corporation - unless property by constituting shareholder. 50 per centum or income. {nh} stituting50 per of centun whether a such determination follows: Mineral, or more of o11, or gas the grose royalties, unless con- income. Under Seetion 404 corporation ia a of the law, for the purpose of persenal holding company, insefar (1) directly or indirectly, by shall coneldered owning ig based on stock ownership, Stock owned, the language used is or for a corporation, partnership, estate, or trust shall be gonsidered as being owned proportionately by ite shareholders, partners, or beneficiaries. (2) An individual be the stock owned, or by or for his directly partner. the family of an sisters (whether individual includes only his by the whole or half blecd), and lineal or indirectiy, by For the purposes (3) if any brothers and spouse, anesstors, person (4) has as an an option to acquire Paragraphe (2) {a} for the requirement previded but oniy personal if, the holding effect is company; (relating to personal (S$) Steck (8) for the stock owned by such person. option to acquire such and (3) shall For an con~ be shall of a series of such options, to acquire euch stock. and each one as an option ship as for his family this paragraph descendants. such steck shall be considered the ocurposes of this paragraph option, gidered or of be applied - purposes of the stock ownerin section 402 (a) (2), if, to make the purposes of section service corporation contracts), or 403 of a (¢) section 403 (f£)(relating to the use ef property by shareholders), if, but only if, the effect is to make the amounts therein referred to ineludiblie under such subsection as personeai holding company income. constructively owned by a person by application of para- by the pur- by reason of the application of paragraph (1) or (3) shall, for the purpose of applying paragraph (1) or (2), be treated ae actually owned by such person; but stock constructively owned by graph (2) an individual shall net be SCHOLEFIELD, CERTIFIED reagon treated WELLS PUBLIC as & of BAXTER ACCOUNTANTS the owned him for wy. MH. A. Browning 3 poee of again applying such paragraph in order another the constructive owner of such stock. (6) considered under either paragraph ah individual be If steck may be considered as owned by him under to make as owned (2) or (3) paragraph by it shall (3). made to imelude Sach eendants. Tt will be seen that the definition of a family is brothers and sisters, spouse, ancestors, and lineal dasfamily counts az one individual in determining whether is more more than owned 50 by cent per not in than five of stock outetanding the of value company the individuals. & personal holding company must distribute ail of ite Title 1A net income or pay a tax at 65 per cent on amounts not in exteess of $2,000.00 and 75 per wey on amounts in exeese of 62,000.00, Adjusted net net income with the following taxes profits There (1) Federal paid Section of means law the of AO6 the adjusetmente: (a) shall be allowed income, deduction a asa ae deductions war-profits, Seetion under - and excess- 23; but the taxable during or accrued allowed not extent Title 1a under income year to the not ineluding the tax imposed by section 102, section 401, or a section of a prior income~tax law corresponding to either | of such sections. Im liew of the deduction allowed by section (2) contributions or gifts payment of which is made within 23(q}, the taxable year to or for the use ef donees deseribed in section 234q) for the purposes therein apecified, to an amount which does not exceed 15 per centun of the taxpayer's net income, computed without the benefit of tion 23(9), and without the deduction this paragraph anc sec~ of the amount disailowed under subsection (b) prior (3) to January In the case of a eorporation organized 1, 1936, to take over the assets and liabil- itjes tion of of the any estate liability of this of section. a decedent, the of amounts corporation paid'in based on liquida- the liabil- ity of the decedent to make contributions or gifte to or for the use of donees deseribed in section 23(0) for the purposes therein specified, to the extent such liability of the decedent No deduction shall be allowed existed prior to January i, 1934. for a taxable year for subsection thie of (2) paragraph under which a deduction is allowed under this paragraph. section 23(a), (bo) The aggregate of the deductions allowed under relating to expenses, and section 23(1), relating to depre- SCHOLEFIELD, CERTIFIED WELLS PUBLIC & BAXTER ACCOUNTANTS My. M. A. ¢iation, perty amount Browning which owned or equal are to he allecable operated the or the right to use, gulations prescribed retary) ated to yachts, the rent by or to the the operation corporation, other compengation of Cowmiesioner: maintenance be allowed received for of only the pro- in an use of, the property, Unless it ie established (under reby the Commissioner with the approval of the See~- satisfaction country estates, the etc. ) a business (Relates to incorpor- (1) That the rent or other compensation re- (2) That the property ceived was the highest obtainable, that none was obtainable; of and ehalli carried on bona or, if nene wae received, was held in the course fide fer profit; and (3) Bither that there was reasonable expectation that the operation of the property would result in a profit, or that the property was necessary to the conduct of the net income aet aside danuary 1, business, lass to pay 1934. Jadistributed adjusted net income means adjusted a dividend paid eredit and amounts used or irrevocably or retire indebtednessof any kind incurred prior The 1930 law previded for “Consent Dividends" and which ig based upon the consent of 407 of the 1930 to alse *Neficiensy Dividends", the consent dividend being defined in Section 26 of the law and enables a corporation which is unable to declare dividends in cash or in property, to distribute taxable stock dividends, to obtain the tax benefits incident to such actual distribution without distributing ite earnings and without depriving the government of the revenue which would arise from the receipt of the dividenda by the shareholders. This result is obtained by creating a new eredit which is part of the basic surtax credit stockholders to include in their gross incomes, as taxable dividends, amounts specified in| such consents, although such amounts are not actually distributed to them but are retained by the corporation for such uses as it may desire. Section law affords to taxpayers new eredit against the tax based upon dividend distributions sequent to the final determination of a deficiency wnder the giency dividende are covered in Se¢tion 407 of the law. made law. in order to obtain a dividend paid credit under section 27 of the law, the regulations provide that no dividend paid eredit shall be allowed with respect to any part of the distribution by a corporation to ite sharsholders (a} Not out SCHOLEFIELD, CERTIFIED which is of earnings WELLS PUBLIC & BAXTER ACCOUNTANTS - or prefite ef the a subODefi- My. WH. A. Browning taxable year - 4. or out tion accumulated of earnings subsequent or profite to February 26, of the 1915, corpora- or, in the case of distributions in Liquidation, not properiy chargeable to earnings or profite of the corporation accwnuleted after February 26, 1913. Section 27 also provides that if any part of a disatribution, including eteck dividends and stock rights, is not 4 taxable dividend in the hands of such of the shareholders as are subject to taxation under thia title for the period in which the distribution ie made, euch part shail net be included in computing the basic surtax eredit. in other words, in erder for a corporationto receive the benefit of the cividend paid eredit the amounts so distributed must be taxable in the hands of the recipient. Handbook comments Rebert relative H. Montgomery to Section “Shether in hie 1939 Federal income ite purpese te 26 as follows: Section 26 will serve Tax any substantial extent ie doubtful. it will be practicable only in the case of closely held corporations. It effers no relief to corporations which are unable to pay a taxable dividend because they have no earnings or profits but which have taxable net income because of non-deductible capital lesses. Deeapite the fact that the stockholders consent to be taxed on the net income euch corporation will be denied the songent dividends eredit becauce the law prevides that the eredit whall only be the amowit which the corporation! would have been entitled te if it had distributed in cash the amounte specified in the consents. Under such circwastances, not only will the corporation be denied a eredit but the stockholders will not be permitted to add to the baeis of their stock the amount on which they have consented to be taxed because under section 23 (h) the amount which may be added te the basis limited te the consent dividends credit of the These provisions are obviously inequitable and should accordingly be eareful that they do not taxed on @ larger amount than would be allowed dividends eredit to the corporation. stockholder is corporation. stockholders consent to be as a eoneent “The sonsent dividend is taxable in full whether or mot the amount, if distributed in gash, would have constituted a taxable dividend te the to him (section 28 (f-2). On the other hand, section 28 (h) provides in effect that the basia ef the consent stock may be increased oniy in the amount that the consent dividend is out of “earnings or profits.” Thus if the consent sateck is later sold or exchanged at @ gain, part of the consent dividend may be taxed twice, first at the time of the consent, and later as part of the gain realised, * SCHOLEFIELD, CERTIFIED WELLS PUBLIC & BAXTER ACCOUNTANTS lr. M. A. Browning ~- 6, it appears that under oli sections of the law, dealing with this question, that there is no way in which a corporation can get @ credit to be applied in reduction of the personal holding company eurtax, exeept through payment of dividende taxable in the hands of the recipients, or through making payments upon indebtedness incurred prior to January 1, 1934. if a corporation sustains an exeess of non-dedustible eapitel losses over the $2,000.00 limitation, the difference will be applied in reduction of surplus and although there is taxable income in & Sigable amount, this reduction can have the effect of reducing earned surplus te the extent that a part, or possibly all of the dividends paid are not paid taxable credit asee seed. to the is not stockholders, ailowable and with the result the personal holding thet the company dividend surtax is in a recent decision, Comalecioner of Internal Revenue ve. F. Jd. Young Corporation, and Commissioner of Internal Revenue ve. L. 20. Pierson Corporation, handed down by Cireult Judge Davie of the United States Careult Court of Appeals, Third Cireult, the court decided that the gain to & vorporation on the transfer of securities for stock of a controlled carporation had the effect of increasing earnings or profite\ available for subsequent dividend distributions. Although the exchange resulted in a gain it was tax free under section affirmed the Board of Tax Appeals crease in the earninge or profite 112(b)(5) of the 1926 Act. eonclusion that it represented of the traneferor corporation. The an court in- Consequently, a distribution made in 1930 from the earnings and profite of the distributing corporation, to a large extent out of the unrecognized gain realined on the tax free exchange, was in effect non-taxable, ag sorporate etockholders under the 1928 Act were allowed full deduction of the amount of dividends received from other corporations. The court held that the tranefer of securities reeulted in a definite gain or prefit and the fact that it was not taxable did not alter the situation. in this case the Commiscioner of Internal Revenue contended that gaing which are not "recognised" under Section 112(b) of the Act cannot be considered as earnings or profits under Section 115(a) of the act. The court stated that the infirmity in the comsiesioner's reasoning lies in the faisity of his major premise, namely, that a gain whichi# not recognized under Section 112(b)(5) earninge or profits under Seetion 115(4). may not be considered as Further it was etated that the very wording of Section liz(b) indicates that Congrese was aware of the distinction between net income and taxable net income for the provisions that certain gaine or profite should aot be recognised in computing taxable income, shows that Congrese realized that as commonly understood they were never-~ theless gains and profits. gimply a definition This of the decision word SCHOLEFIELD, CERTIFIED aiso dividend WELLS PUBLIC & sets and BAXTER ACCOUNTANTS forth merely that Section distinguishes 115(a} is between Me, M,. A. Browning 7s @ distribution out of earnings and prefits and a distribution out of gapiteal. The worde “earnings or prefite", ae therein used, are worde in common use and are to be given their natural, plain, ordinary and eommoniy understood meaning. The question involved in this case was whether or not a gain which regulted from a tax free exchange of securities under Section 112(b)(5) of the Revenue Act of 1925 eould be considered as earn- inge or profits out of which dividends 115(a) of the Act may be declared. within the meaning of section The Department is now following the “Young” decision ag it relates both te non-taxable exchanges resulting in prefit and alse in losges. Revenue agente are going back to March 1, 1915 to determine whether or not distributions have been made out of earnings or capital in the light of this recent decision. Most pereonal holding companies, including your own, have distributed their earnings @¢o that they do not have a large earned surplus. in the light of the "Young" decision let us consider that your corporation had, at the beginning of the year, an earned surplue of $20,000.00. Sarnings during the year amounted to |200,000.00 and that you paid a dividend of 6220,000.00. Ordinarily you would not be Liable for personal holding company undistributed profite eurtaxes. However, let ue say thet a non-taxable lose of $50,000.00 was suetained during the yaar through a transaction arising wider the non-recognition praovisions of the law. It would then be necessary to charge surpius with $50,000.00 reducing the amount available for the payment of dividends to £170,000.00 and even though you paid an income tax, based upen your earninge for the year of $200,000.00, the Government would say that a dividend credit thie of $170,000.00 amount would exhausted your be a1] that earned you could surplus. receive crecit for as A per@omal holding company ic, therefore, placed in the position of paying an income tax upon statutory Title 14 income ami having an entirely <4ifferent amount used for the purpose of deter~ mining the dividend paid credit giving recognition to non-taxable ex- changes. lLesses Extreme which $2,000.00 may care be limitation must sustained be exercised and aiso by your in connection corporation non-recognised with a11 in excess transactions of capital the resulting in lessees. it is quite prebable that a non-taxable reorganization of some eorporation whose securities you hold might necessitate yow recording a “lose te surplus account. which you have no means of offsetting with the result that a dividend pald eredit wili mot be allowed and personal holding eompany surtaxes assessed. in other words, a non-recogninzed lowes for tax purposes may cause you to become liable for surtaxes in the full amount of such loess. this GBI 6 connection, if please we gan be call upon of any ud, further ascigtance Very truly yours, SCHOLEFIELD, CERTIFIED WELLS PUBLIC | & BAXTER ACCOUNTANTS bpm to : put ! you in ONGees h THATCHER ROY D. THATCHER PAUL THATCHER B. YOUNG FIRST SECURITY BANK August Browning G en tL em about any BUILDING way possible eral of 19389 Company confirmation I called promised his the 8, ens © By for YOUNG OGDEN,UTAH action Mr. A. report T. to oft ax. on - assessment the of my report Clark at Wa shi the Departme application | oe m he hich has ston and SSCL re Cc ure to told hat he he i say been yesterda we 2 nN ‘made Seca, n n Ss vacation vacation. basis the matter of ee tax his suggestion, conrther f the but was held up awaiting 1, considered be should two the they felt of the suit; so that if the court should decide on the basis for a large number they will adopt it for the other; continue gues out oS vacation and vacations will Cy oOo SO sch Crm rh)Pp On: i ey At of because the until held be can of Bren are geet towards looking conference satis aa actory case number the men ans a the want ace go men rec ommends that we let the case ie to come and that we further, negotiate ws BS no a =) LE ROY & LAWYERS soon case. as the He Department does mi recommenda atio ns 3 ~~ conierence - will remember bs a be time, good but excuse he for 4 “9 | Sd ma has by tnree ie is pleading the that Clark Mr. be ready. delay. de that wil a worthwhile. Clayton advised us that pefore his report would ame reviewed be _ when just must 1 weit You Justice of know not al Boer neede He illness ° 7 | pe ia : its or \f-A ww § in- settle- Browning Page Company #« It looks to me making an adjus U it mn Washington as understanding will soon as is that concur mm > | 7 m7 ' nolL? } te Dae od CE oF o. j CC - Gordon Ogden, Tee <1 pt. Louis, Baxter Utah be } a : better gs) the r rp we must e allow the to walt, fall tern, conference can our be conve THATCHER ROY D. THATCHER LE ROY B. YOUNG PAUL & YOUNG LAWYERS SECURITY BANK FIRST THATCHER BUILDING OGDEN,UTAH August Committee on Treasury Enrollment and Department Washington, D. 8, 1929 Disbarment C. Ret Browning St. Louis, Arms Company, Missouri, on sale of 1942-1935, ot Ogden, Federal firearms for inclusive. Utah and- excise the calendar 1945, Browning taxes years Gentlemen? Under date of December 12, Arms Company.executed its power of attorney to represent it in the above entitled matter to Seymour Yells and Lynn & Baxter of Salt Lake City, and the undersigned, Roy D. Thatcher, of Ogden, Utah. Shortly thereafter, the exact date not being known to me, power of attorney was filed with the Bureau of Internal Revenue, or attached to a "protest and objections to assessment the Collector of of taxpayer the that time, there and excise tax" filed Internal Revenue, was no December 16, 1925, with &t. Louis, Missouri. At contingent attorneys named or fee any agreement of between them. the Two cleims for refund were filed and both rejected. Thereafter the firm of Thatcher and Young, of which I am a member, made an agreement with the taxpayer to sue the Collector of recover the services in Internal Revenue at St. Louis, pay the firm a retainer of €2,000.00 and expenses plus 10% of any sum recovered. paid in full. Thereafter agreement and the Bureau Subsequent of Internal supplemental brief nection with Missouri, taxes paid. That agreement provided that the prosecution of ths suit, the taxpayer it the is now matter. was suit was pending. filed in to for its would all out-of-pocket The retainer has been | accordance with the to the filing of Revenue to grant the action, we requested us a conference in con- later further The conference filed. No was held, and action a has yet Committes on Enrollment and Disbarment August 8, 19389 Page #2 been taken by relate to the Bureau of Internal yending under & stipulation answer until notice. RDT: DEJ ~ ® no Lnere compensat x on. Revenue end contract that the defendant other terms of Yours truly, Roy D. Ogden, the need Thatcher Utah the suit is as they not POWEROF Js Me & Me. Utah, does and KNOW Se. operating GORDON ROY D, by ALL MEN under and BROWNING these THESE PRESENTS, by virtue COMPANY, presents that a corporation of hereby the make, laws the duly of undersigned, organized the constitute State and of appoint M, BAXTER, First Security Bank Building, Ogden, Utah, and THATCHER, First Security Bank Building, Ogden, Utah, and each of them, as and to represent With its Federal i962, BY ATTORNEY with full its true and lawful attorneys to appear for it it before the Treasury Department in connection excise taxes for the period beginning Jime 18, power of substitution, association, and revoca- tion, giving its said attorneys full power to do everything whate soever requisite and necessary to be done in the premises, and to receive refund checks, to execute consents agreeing to a later determination and assessment of taxes than is provided by statute of limitations, to execute closing agreements relative to the tax liability, and to execute waivers of the restrictions on the assess~ ment and collection of deficiencies in tax, and all other acts, as at fully as any time tion hereof. garding to the undersigned might do, if done subsequent to the date hereof and act, herein, in its own capacity, prior to the revoca» It is requested that copies of ali communications re» any matter in which the said attorneys are hereby authorized be addressed to the said attorneys at the address mentioned 7 Prior powers of attorney for this purpose heretofore filed or executed by the undersigned for the said period are NOT hereby revoked, This corporation has a seal, IN WITNESS strument to be corporate seal WHEREOF, executed this by its day the undersigned has Je. Ss caused duly authorized officers of August, 19659, ATTESTs Me & Me this under BROWNING in+ its COMPANY Sta, “Secretary (Corporate f 3 “ seal) ge President Af — : \ STATEOF UTAH COUNTY OF WEBER ) SS, Executed in my presence this iy day of 6 at Odden, commission August, Uta expires « 19359. THATCHER ROY D. THATCHER LE ROY B. YOUNG PAUL THATCHER FIRST & YOUNG LAWYERS SECURITY BANK OGDEN,UTAH July 28, J. Me. Ogden, & Me Utah S. Attention: Browning Mr. BUILDING 1939 Company Marriner Browning morning's Clayton: airmail Gentlemen: This from Mr. letter pected Arms be nT have yours of July 22 trip east in ae help to able within Leaving Of course, if the necessary on now from out. August days On 25 the before you er. or two you three and note your exwith the Browning sorry come that as soon San for days I I other hand, taking the be will I here shall for balance intimate doesn't find could he what how be the back am Francisco my long his can do so busy to here or annual come my guess he will probably be, but it comes on his vacation. time Mr. Eecles time two about of not will your gems are made Marriner and I don't think he will be but and am I cas Tax Excise following the me brings three leave." vacation west help about will about the I am at a loss to know what to do, but since as to when the fall term of the Federal Court On lt pErerma will be held has important bearing, I am writing to Mr. Russell suggesting decided better that he we know get the piapelekce Ndi from Mr. Perhaps we had better get our own vacations as soon Berry. as possible so they will be out of the way, but that can be be tried. when the time Yours the ci CC —- ot. B oReeset i Louis, Missouri Gordon Baxter Ogden, Utah may truly THATCHER CO case & YOUNG have to THATCHER ROY D. THATCHER LE ROY B. YOUNG PAUL FIRST & YOUNG LAWYERS SECURITY BANK THATCHER BUILDING OGDEN,UTAH July 13, 1939 A. T. Clark, Esquire Civil Division Office of Chief Counsel for Bureau of Internal Revenue Washington, Dear tir, D. C, Clark% conferred It Re is now with Browning nearly you Arms sheehan, a month about this case Companyv. Thomas Lawrence Clayton Collector since Mr. and — learned Excise that, d. taxes, because of. your illness, you had made no disposition of it, but expected to have your recommendations in the hands of the Department of Justice within thirty days. We sincerely hope that you have been well enough to accomplish that by now, Our client is very anxious that this case should not go over the fall term, That is especially important to it, since the Department nas taken the position that no adjustment will be made can also under be serve notice matter worked requiring Section adjusted. him on to counsel in is, to the for (b) wntil therefore, the claim our United States Washington without further complaint for intention the plead out 619 It unless at we St. can refund to Louis delay. get the When we presented the matter to you near the end of last November, we felt very strongly, as you no doubt observed, and we still feel, that our client is entitled to a refund of the entire tax paid. It would seem, however, from the long delay, that the Department may prefer to try the case rather than to concede the entire demand. Having thet probability in mind, our client has finally decided to offer to discuss a compromise settlement and has authorized us to say that if we can settle. get It together is on prepared a basis to which make seems substantial to be fair, concessions. it will You will appreciate, however, that negotiations will have to begin very shortly if we are to have an opportunity to compromise before it will be necessary to require an answer. That advise being us a compromise sible the at date? situation, once whether We again settlement, are will the and you not Department if writing so, Wr. have what is is the kindness willing the Lawrence to to discuss earliest Clayton pos- with Page No. 2. the request transmitting to them he to call ascertain what be made, Ur. happen that you will us. you and if an appointment can come to washington. if the case to this letter it should are your wishes, Baxter and will have already transmitted telephone you obtain I the Vepartment of Justice, will you on to.the proper person? A copy is kindly pass enclosed to Mr. Lawrence Clayton and We sincerely hope make that your message made, that convenient. to be transmitted that to us. an early fours Roy appointment can truly, D. Thatcher browning Arms Attorney-—in-fact | for Company be be THATCHER ROY D. THATCHER LE ROY B. YOUNG PAUL FIRST & YOUNG LAWYERS SECURITY BANK THATCHER BUILDING OGDEN,UTAH July 18, 19329 Lawrence Clayton, Ssquire Office of the Chairman Federal Reserve Board Washington, D. ©, Res Browning Arms Company v. Sheehan gs to Mr. you on I am enclosing a copy of the letter stile 201s ia the same matter about June 1Léth, receipt Will it be convenient for you te. call ir, Clark on of this letter and ascertain if he is gees yet to ma Ake an rage bectager with Pole ‘%Ariane E of forge ious ror “an early ‘aepointdent: shat we will any time that an appointment can be made, fe is Fer under Head of the ir, HWenghel Hevenue. early your Ur, convenience Wenche]l. and is in Mr. _take get gun velephoning with we have written which we wrote &. &, ur, pie BP pe ha ALRO Clarics Faulkner, Civil Division, Bureoak of Internal Revenue, is Chief Counsel of the Bureau of Internal we hope you ir appointment. Will be able to make Yours Roy a comparatively truly, 2D, Thatcher oft THATCHER ROY LE D. THATCHER ROY PAUL FIRST B. YOUNG SECURITY THATCHER YOUNG BANK OGDEN, July % & LAWYERS ase re Mear ay BUILDING UTAH 16, 193¢ Browning Pa ¥. sonrerence “we for written your Sheehan arms Hr. With to cay te Ra at 2 “4 eT ti i ie I» infor iBee tion about wCAtGB, wil me then Sek prepa with baie RDT ‘ ery be lnaloaurs ng notice hit a on anna rbieigpiid _ bhe Browning and ark and Cl ‘-R elayed ve Company Edith Pi for compl sugeeating to auch an try this do not sna. uni and tad we SCHOLEFIELD, WELLS & BAXTER OFFICES BOISE,IDAHO J.B. SCHOLEFIELD, WELLS,C.P.A Ue hans Se eelaer ie ec RS SEYMOUR FIRST SECURITY SALT NEW UTAH LAKE CITY, UTAH —LOS ANGELES CALIF. OAKLAND, AND BANK BUILDING OGDEN, — SAN FRANCISCO ACCOUNTANTS PUBLIC CERTIFIED C.PA.,A.C.A. Pe Spe ae YORK CITY — CHICAGO WASHINGTON,D.C. July 13, 1939 Browning Arms Co, St. Louis, Mo, Dear John, Mr, Browning has asked me of the Excise Tax Case, to Mr, Thatcher with 1939, Mr, addressed advising furnished Thatcher that able to study Department of have the case or duly Zist, Mr. the Mr. received the case Justice, complete 1939, of a compromise In the on event satisfactory conference, can we are compromise Mr. be Thatcher tried 13th, account of a letter kindest the present of the letters from 1939, On Lawrence illness, had status which June 21st, not been he Clayton in to unable settlement will the that is hoped It we Clark with discussion and the be will able to if a so that conference in Washington shortly. sent to Washington by Mr, Thatcher of Fall We will do everything possible and satisfactory conclusion. With copies June of writtento Messrs, Clayton obtaining a conference for settlement. that you and make his recommendations to the He promised Mr, Clayton that he would with his recommendations in one month, appointment for a the letters today furnished you. obtain an Copies of are being case dated Clark, Thatcher has today thought in mind of the you to Washington advise obtain cannot course term to bring a conference, be effected request of court. this at or answer an ease to be bn an the early regards, Sincerely Yours, SOLO CED tr CER SCHOLEFIELD, J.B. SCHOLEFIELD, SEYMOUR C.PA,A.C.A. CERTIFIED WELLS,C.PA. LYNN E. BAXTER,C.P.A. FIRST WELLS PUBLIC SECURITY BAXTER OFFICES BOISE,IDAHO ACCOUNTANTS BANK OGDEN, June & AND BUILDING NEW UTAH lu, — SALT SAN FRANCISCO LAKE OAKLAND, ie maices YORK CITY, UTAH —LOS ANGELES CITY CALIF. — CHICAGO WASHINGTON,D.C. 1939 A. Browning, Vice-President, ha M. & M. S. Browning Company, Ogden, Utah. Dear Mr. Browning: We annex hereto copies of memoranda reflecting data on the pending excise tax case, for your information and files. These statements were gone over in detail with Mr. Russell and copies furnished to him. regarding these planations. If any question arises statements we shall be glad Very GMB:c truly pA in to your mind offer ex- yours, hit ee i A4 e BROWNING ARMS COMPANY ST. LOUIS, MISSOURI MEMORANDUM REFLECTING DATA ON PENDING EXCISE TAX CASE "A" Period June 21, 1932 to September 50, 1935 (Period now in suit) Amount to be refunded in the event the law suit is entirely successful in connection with sales made from inventory transferred June 18, 1932 Interest Interest to September 30, 1935 October 1, 1955 to December 31, 1938 Interest January 1, 1939 to June 30, 1939 Total refundable if sales from inventory ere exempt in Amount to be refunded tax basis interest Interest during suit is allowed on subsequent to September 30, 1935 October 1, period to June changed if difference importations 1935 to December Interest January 1, 1939 Total refundable if basis is 31, 1938 30, 1939 during, tax\ period AM A "B" Difference are not Salss in tax during considered tax suit period exempt from inventory interest recomputed to Interest September 50, but 30, from subsequent importations Interest recomputed to September 30, Interest October 1, 1935 to December interest January Total 1, 1939 to June 30, > as PRR 1939 is allowedas 1938 1935 31, 1938 1939 yj Ct from inventory basis September 30, 1935 1935 to December 31, Total Sales if sales adjusted Interest January1, 1939 to June from tax expected NY ‘ ON PENDING Tax Interest Total 57,986.77 $57, 996077 6,982.93 "$6, 985.98 57,986.77 12,281.84 11,307.27 1,739.60 $25, 528671 12,281,84 11430727 1,739.60 3,015e48 6, 982.93 66951 66 » 51 1,361.49 209.48 $1,657.40 15361449 209.48 $6,600.41 cog Vie a 14,096.62 ~ $14,096,062 6,982.93 $6,982.93 2,930.77 2,748.72 422 .89 $6,102.38 66,51 1,561.49 209.48 | $1,657.40 ania Mae sie ; £ anye5 ae th aepe i Pe . ( $91,935.89 | eg 14,096.62 2,930.77 2,748.72 422 .89 «$20,199.00 6,982.98 66.51 1,361.49 209248 $8,620.41 _ $28,819.41 Lat es yohs? 4 y axe BROWNING ARMS COMPANY st. LOUIS, MISSOURI ING N REFLECT ORA MEMDUM EXCISE Difference in (Remington Difference if tax in adjusted price) - Sales allowed is upon if tax jobbing - Sales allowed is SUIT basis for tentatively gums inventory from basis adjusted (Remington jobbing price) upon TAX for tentatively agreed 1,866.98 guns subsequent from PENDING ON DATA agreed 354000601 $35,099.99 importations i 7 Amount books accrued now and as a liability shown fe upon ¥ lenin | : ONT 1, gpa PME EOC Ht Pe aig rete upon Reserve Account Corrected 1935 1936 1937 1938 and 1939 Adjustment considered Refund Less as Maximum and income in year period of Prot (maximum) —@ oa; canada oeSy aS : 1 yw’ A ‘ 5 ye se vag spistaans PyaiT/SO NG SEFt ALR He ae a BOE ~ Bip ie yf 063075 _— inten al 4 Pe $16,155.44 tl, we et ee) "Suspense" Account may be considered as taxable 89,986.81 $125 050054 | income re, ae beAhntooe® $5 065679 adjustment to charged amount which Behe? A Mos 2.955206 11,035.97 8,008.36 13,064.34__ $35 063.73 of tax during suit Total tax paid a gS by years to "Reserve" Account which may be taxable Pde ef 35 RieeeT AS Pe be adjusted to Amount a 51, 217617 J SHV pn figure Adjustment necessary to bring reserve to agreed y tivel tenta and t now considered to be correc 8 63,784.64 _ $61, 265290 : a i oF : ael 7 gt THATCHER ROY D. THATCHER LE ROY B. YOUNG PAUL THATCHER & YOUNG LAWYERS SECURITY BANK OGDEN,UTAH FIRST 1929 LS, June BUILDING Lawrence Clayton, Esquire Office of the Chairman Federal Reserve Board Washington, by dear D. C, Larry? YOU Will recall that Gordon Baxter and I were in waghington about December Ist on the case of Browning Arms Company against Sheehan, We understand that the Bureau of internal Revenue has now referred it to the Department of Justice with its recommendations. We are now trying to learn who is ascertain and to the whether that man he there has in charge decided what end we are writing of the they case, and to through A. will the Department do Clark, of the Civil Division in the office of J. Chief Counsel of the Bureau of Internal Revenue, closing a copy herewith. | Faulkner, enough to Head ce Clark is under Ur. Wenchel and is of the Civil Division, with whom an appointment for us through Mr. with it, T. FP. Wenchel, and are en~- with Ur. you were 6, &. kind senchel,. in a day or two, if it is not imposing too much on you, will you kindly call Mr. Clark and ascertain from him the name of the man in the Department of Justice whe is hand» ling you the also garding case and their intentions cali We thet have how to reach him? as the gentleman had an and to That ascertain intimation being what disposition that learned, you of will can re-~ decide to the they may try learn case? carry it through the court, but that may be @ matter of attempting to get us in a proper frame of mind to compromise. Mr, Faulkner mentioned a compromise, so that is no doubt in their sinds ag a possibility. My guess is they will say they intend to let the court decide, However are their have we learned mail? it is that intentions often have that very may be, regarding hesitated to without good diffleult to will the you case to and let bother you further, friends like you in gst information, what us know air but we Washington, Page Board. No, Ly Kindest regards to you all at the Federal Yours: truly, Roy Thatcher D0, Reserve THATCHER ROY LE D. THATCHER ROY PAUL & YOUNG LAWYERS B. YOUNG FIRST SECURITY THATCHER BANK BUILDING OGDEN,UTAH June 13, 1939 A. T. Clark, Esquire Civil Division Offiee of Chief Counsel for Bureau of Internal Revenue Washington, Dear Mr, month of transfer May lst. this been D, the C, Clarks Res: Browning Arms Company vV, Thomas J. Sheehan, Collector, Excise Taxes, Our Mr. Russell, so that the who called on you in the to whom it may have April, has advised us that you expected to this case to the Department of Justice by We have not written further about it until time, assigned may gentleman have an opportunity to study it. We now want to communicate with him, Accordingly, we are enclosing a letter to the Department of Justice which we will appreciate your addressing to the proper person, so that he will receive it promptly. Lawrence We are Clayton, also writing Assistant to to our the good friend, Chairman of the Ir. Federal Reserve Board, asking him, in a day or two, to communicate with that gentleman and ascertain his in+ tentions regarding the ease, He will call you to learn his name. Our thanks in advance Yours for your kindness. truly, Roy D, Thatcher Attorney~in-fact Browning Arms for Company THATCHER ROY LE D. THATCHER ROY PAUL B. & YOUNG LAWYERS YOUNG FIRST SECURITY THATCHER BANK BUILDING OGDEN,UTAH June 13, 1939 Department of Justice Wasnington, D. C, Gentlemens: Re: This Court at Claim should Counsel of Revenue St. has transmitted what those ease Louls, been be to the is Browning Arms Company v. Thomas J, Sheehan, Collector, FTV pending Missouri, considering paid, you, and with Bureau of recommendations we the it in the United on our Recently understand are, District Bureau that it has We do suggestion recommendations Internal States the Revenue. of of that the Internal now the been Chief not know We have asked Mr. Lawrence Clayton to telephone you As you may know, he is and ask regarding your intentions, Federal Reserve Board, the of the Assistant to the Chairman when he calls? information Will you kindly give him complete In April we were told by the Bureau of Internal Revenue that the case would be submitted to you about May and we hope that you have now had time to become familiar with the problems involved, Yours truly, Roy D,. Thatcher Attorney-in-fact for Browning Arms Company Ist, April 17, 1939 tir. ng ieDe Thateher, e Firs t Security Dank Bli ge, we ie [Or tig Deer U tah Roy's Your thoughtfulness kcroit in wiring me “ ee be on guard egainst cas case ~ a Des Seat § attempts to lead me inte discussion of facts in the tax aad Cin te d, however, I did not encounter S dow such effort in any of ferences @ i apologize in advance for the probable Leng i feel I should give you the details resultent fron ington last Chur sday end Pridaye sega i A decided ereinst arranging : 3 onlex se j t my a con- hi WOVSE in Washe through anybody to reach any of the men I me I could call » a ‘) fret bj expected to —_— elt “that informal calls would catch them more off guard than if t; ned that I was coming and poesibly I could thus 4% get a more acwureti: reaction of a their attitude end position. I ficured if and unableto i was fret ‘Salees Department that see able to then see each man ee Py eiosb on ag aye is back hor immediately, at td *sdeye. I have never had nor scitaeouen then I had in each ndly SNS Fo gh 9MDO it es) at ob busy Fortunately 2, y oy could I ask Hekstrand was for y hie out, an except 2” ie Clark & he called in ur, more but informal or assistant, whom we 7 noc meet Dut whom I found was thoroughly our case. "1: was only able to se the date on letter from Hoyt's to ‘aullner's fm, Be +2 aa ade oy ari ~ they fo On tes car” ore? © re. aneag, to F eT Bt yt ice GF abuletion Fe fese a Te our ten- yt % case ee 22.8 and this letter ie wee ctwah iskeor nOVS) 4 a“Fea Lier if EeY 3 I had 1 for ae this and 2 Vth, $a com : 4 ie aes . 4 s— was dated ios 38 Uwe , . +b eS bf td : #3 . » Sie A i ae Sher wastes ond that the su & dote vinotiel thet they were able to Ramat 5g make th decision as to our taxable base. He stated they — = ats sats state this decision, h raesed. — the law suit phase of the ae oes as wottled beceuse of Fender assme ae ause to the ‘eose" 2 tees thet , they Were = ga tation, which we 4d ted | salt e statement his ¢ mise tex base about ype evious confer enc: at as Spatong e surce tabue eer the couclus ' My discussion the following dey with Mr. Clark I ete iasked him if he would mind telling me off the record the conclusion np ag Loyt's Department azenc he said they were inclined to accept the surgested lowe tax vase asreed Pr but that Phe that roeyt in byes woulc 3 wt . ne E, sy ~ matter | eae . officiel } p ve ‘ne two Departments . + aon PO. Poin: “ et & * tne %. they 1 had metter wr because z . i¢ would “snerl up the law suit", He rather reluctantly gave me this information and so I don't. think we should ettemptte use it except that it does tell us what we would probably get from Voyt's Department if the i yt will thus not act on the tax base matter until la. Hoyt apologized for the delay in the that his Department acted very promptly after lew suit were out of the the lew suit is settled, Wey e leral. end, though it ie evident ow conferences He volunteered the suggestion thet I was doing the practical thing by follows ne ee because the great volume of work thet is being handled “by i the Dureau and that uman natawe to cive first attention to the sR pressing matters of find the eligi ver et indication of offense in any case with my a btempt to : through as I was doing, but rather an widerster nding and cooperative reac it im every case, itt, Faullmer volunterily advising us regarding ite pending cases» They have on these coped Casests Faulkner apologiged for the delay in handling the case He said the Department now has something over somethi ing over 250 attorneys in the Department o 20,000 working Clark personally is responsible for anc is now han dling 160 odd explained that arg head been i11, but would be beck to the of~ fice the Selioetan morning eid enid he would call him at home review the case end be ready for a Ran abinck WLtA mo et Ose " requesting that he the next WOr nine » Peulimer stated his office was anxious to get allsuch cases closed 6s soon os practical and assured me our case would have their attention and they would be ready could for not the conference the next mornings Ue asked no questions whatever have shown a more friendly, cooperative and interested attitude. end * 1 found An conterence the conversant’ with the Clerk was length their reasons sisting our claims for taking case, because thoroughly Mrs. Clark when he ret ocnes following to hig office case. he was morning end carr. ing presumably our file equally » friend lly and on end was efter our a rather rendom review of t he Case, during which he ask ced no questions whatever and did practically all of the talking he told me that they “thoucht they could make the statute of limitations stick” in resisting our cleim for refunds He hardly referred at all to the relationship of principel end subsidiary, but discussed at acvantace of the statute of limitetions He stated that they greatly appreciate the careful, thorough information you have sent te them and Incorporated in your filincs feel that Clark is personally sympathetic to our position. and and in re- complete 1 rather During the course of our. discussion he eteted that while he personnally is hemdling the detaiis of this case everything he does recarding it or an, other case he hendles is reviewed end initialed by at least four other lawyers vefore the Department officially acte on any matter he handless ie at talked He states s longt h about this is general Paragraphs A and B, prectice in the Seetion 907, Department. Revenue Act of Our first « ciaim for refund was rejected July if7th, 1956, .The effective the Revenue Act of 1956 was Jue Gey 1936 and so thelr action on our £5 te laim for refiumd would. come under this Acts Our second clain for refund wags rejected May 26, 1958, according our second claim for refund, to copies of their letters which Clerk ou second claim to and I carefully reads As our conference progressed li, Clerk warmed up suffie ciently to not be too careful to keep me from seeing their files on the case and I noticed a pencil memorandum initialed by Dodge of Hoyt's office relating to interpreted he 3 that ji hein already run age inst had which he considered statute the to prolong be an attempt ute Their letter rejecting the second claim was based on this Pinegttean. and the wording of this letter specifically refers to their letter in which they rejected our first claim. I argued that our second claim was not a duplicate of the first and should not be so eonstrued, but he said seme since it referred to the same specific Paragraph B of Section of this indefiniteness the been has there thet mitted 807 is not paragraph still and they considered amount. pertioularly permit ang the the statute be the result in this to rum against the taxpayer and stated that they Claim to be sent by registered omil, which was not done have a difficult problem far more confident ast winter's than when the on made cur cases seme, ider the prectical re sult the we recoived the first ietter. carhop d that Guized they the same The things felt position for im our in our was of their take him how they could 6on our case and he reconcile smilingly material that would wuppor’ their Im spite of their similar rights the not point wes It was between thate apparent case... of ‘be: ing during with would, of the cone show he was said and case one They the absol\ utely our other and handled I briefs position uso course, they only _ a position, inferring that "the ¢ ee to attitude ative cooper and apperent widget Government that mean nicht developments raised reasoning that they answered me it is, of course, plainly evident every possible technicality to gain unfair to me as we can do about Pick riek that ad- position of denial the During our dsicussion Clerk stated that he personally prepared Pickwick case to which you refer eat length in your su] pplenentel asked the over thet this subsequent however » Since Hie confident provides paragraph he and contested many times in the Courts hed refused indicated but record case, the I suggested ours as controversy ine of Paragraph By He admitted thet this point has been the Courts and he volunteered that in over half the cases to and such of deal a great is definite cases it fit makes it essentially thet the Government will take advantage of its sali end the situation appears decidedly and they have done some is enclosed he rewithe The saute is nothing but 7 suppose there research om the question taxpayer, and have I probably developed additional information to that contained in your briefs, Clark which date this of some ne asked Itire Clark to dictate a memorendum Serer said was new and which you probably did not have, which he did, the original copy of which % Apparently with a wiew to determining the were made intent by and Clark of Congress hig Assistant. as to Paragraph B of Seotion 807 they have had their expert on the Conzressional record make a search and the only informtd on found is enclos — in the attached copy of this report which I ws fortunate enough to obtains The specialist, EH. De Connor, who this search, is en elderly, though competent woman, wno seemed to know Clark kmows I have this copy, in fact it was obtained eneat she was doings a taxe while I was in his office, though Miss Comnor dic not mow that I was helpful be might thought I payer until I had sl ready obtained the copy, which to yous wheat the tiwreference to Section Government recently record The snows. is not a typographical a case, which 609 : lost wore there that indicated namely appeal, to plen they Clerk vee Burnet, Company Cliften Menufacturing is but that error, me to take matters of common interest between thet case and ours and permitted h Clark said you would like 4 ¢ wi the following notes from s letter in that file, anjwould save you work. (24) 816 cers den. 58F (2a) 1068 to have 61F 5 Feds SUDDe 425 Supps 74: 6 455 main thing which seemed to worry Clark is de what the case after the statute had run againstu our The ovening™ £4 supplemental that rather new requests for our second claim "re« constitute and wi would cleim under such & reopening * common practice for the taxpayer to file I told him this was not our purpose, refund done, we have interpret as they period hut or it was very that stated 4 constituted denial its and our second request for refund Peragraph B, Seotion SO. Clark references: 72 269 US 6iF (2a) 791 cere den, 289 US 6 Fed. cop i ed the following J, therefore, for with but the because filed was refund the a viewto extending statutory WES one first is answer to this, however, was as above inadequate and not properly drawie indicated concerning the same amount being involved in both claims for refunds Clerk stated thet he would prepare the case for transmission to the Depart Louis, but ment of custice under whose supervision the case will be tried in St. it wes said “e . Attorneys District States United wrobably by the local St, Louis unlikely that amyone would from Washington advisable for vs to then out come and assist in trying Case the Clark suggested thet after the case reaches the Depart= though someone may do sO it may be ment of Justice and they have time in which te analyze the oase that thought it advisable ere compromises made to and Department being referred to the mise if we elect to do eo by out of his office require about kw to have the case Department would soon as I was possible last if eo i pry durine Mee, ft tne = 4% as i all in £? es terme about it were ee . to be of the % %. ; said within ebout two weeks weeks so we could file May 15the tried and thet I so you would informed would be ready ntWOULG Governme ated no ny Ree ie he ce ey? 4% oy OF RGF ok. oF tam at 7. He usually were of dustiee BiG. oR Bee = involved amount adjustment. though settled, indicated you en im Ogd thes thet doubted he thet i aiid es Court, feat Se thus cases an such request then ter When an adjustment request stated that and ou we some such times af- cases Clark promised he «stimated the request for compro- like to try the Clark, to try the Pros OTL. a zt oh. eh CHGrear rygete most tried. if that 6s however, stated ware tal bsvsery dauryon Lo case berore Gist x Sugs case he Case aed ke the fall a such in the above I have tried to cover my conterentes in Washington, but not clear i shall be very glad to With Kind regards, Sincerely, Browning V about everything thet occurred during if you have any questions or if the above help further im this or any other ways is Room 5550, Telephone Internal Revenue April 14, 1939 lire Ao Te Clark re; Section L936 Act 807, This was an amendment presented while the bill was in the Senate, I attach excerpt from the Con= gressional Record, volume 80, page 90735, and from the Conference Revort. ile De CONNORS Drs Blidge, CONGRESSIONAL Volume VALSHe Mite RECORD 6&0 President, I.present another amendment will be stateds On page 272, after line following new sectlones 12, it The cece sed Secs is Chief Clerks to insert the B09. Section amended Reconsideration S226, by of of the Revised addime at the end Refund is Claims, Statutes, thoreof amendments the as amended, following sentence: Mire President, the purpose of this amendment he Commissioner of Internal Revenue, after once aim for refund, to reconsider such laim on the thout increasing the statutory period for bringing suite (b) Makes be shut off. 608 (b) agreement x test the to it clear that no rights (2) gives prevent Commissioner of 7 the Sense agreed TO. power limitations shall to enteer into an operating pending suite The PRESIDING The amendment was amendment te the statute already acerved OFF offere 387 from ig on wahecwash tO Massachusetts THIS. CONF BR! aptNCE OT TN Peet sf Uruk 19) Amendmont mumberod That the Houses an amendment amendment with of the 2583 recede Senate as from numbered its disagreement 253, followss and agree to the to the sane In lieu of the matter proposed to be Senate amendment insert the following: ry wf Secs S07, Reconsideration of Refund Claimse (a) Section 3226 of the Revised Statutes, as amended, is amended by adding at the end thoreof “Any consideration, PeRcaseler ahs or with respect to succh claim following Yogisvered 1 nail of disallowance shall the period within which suit may be becune" operate the following action by the not mailing new sentences: Commissioner of a notice operate to extend by the (b) The amendment made by subsection (a) shall not (1) to bar a suit or proceeding in respect of a claim reopened prior to the date of the enactment of this Act, if such suit or proceeding was not barred wider the law in effect prior to the date of the enactment prevent the suit under of of the statute of the agree to the same. section 608 (b) or (2) to limitations (2), as amended, for filing of the Revenue Act 19286 And (In of this Act, suspension the conference showing reasons Senate er was no explanatory report there for changes os statement April Memorandum for Mre in Arms res Browning Russells Coe vo Farmers Underwriters of California, Central |! 4 | of law filed February Case involved takene Note 5, tio Shechans 1989, ets ation ve Scott Carter, UsSeDeCe findings of fact and conclusions rose, ing Arms cases Hoth igesues wore The amount involved is so oma be 14, that the statute only one of interest in the Brome- deckded in favor of the taxpayer. do not imow whether en appeal will in Farmers Underwriters in S. 665, Association case is Section 5226 Revised Statutes, as amended by Sec. 1103 of the Revenue Act of 1952. The statute was substantially changed by See SO7 of the Revenue Act of 1936, enacted June 22, 1936. The 1932 amendment, SOSBe, Cotige Pe supra, is discussed Rep. 72nd Conge,lst Ove Sece Record, 807, Vole of the Revenue Se, 208 of the House Weys and Means 80, De Act 956, is discussed in Senate Reports 12795, 74th Congress, 2nd 907d Session, was the same as Sec. 807 of the Senate Bill of the kevenue Act of 1936, except for the addition by the latter of the word "reconsideration", House Reports 2818, meri discusses Report, the 74th Conuress, purpose of the @nd Session, amendment. A convenient summary of the legislative history @ Sec. 807 maybe found in Seidman’s Legislative History, Federal Ineome Tax Law, published Se¢e Year 1936 Congresse in 1938, SO7 was (as Am. by Prentice-Hall, Ince, at discussed in the Conference Report 7258) at page 19. Throws no light Ae Te CLARK pages 284 and 285, House Report 3068, on the intent of THE COMPANY WILL APPRECIATE SUGGESTIONS FROM ITS PATRONS CONCERNING ITS SERVICE X CLASS OF SERVICE This is a full-rate Telegram or Cablegram unless its deferred character is indicated by a suitable symbol above or preone the address, 1201-S r SYMBOLS | DL = Day Letter NM = Night Message “It_= Night Letter Deferred Cable NL1i R. B. Se J.C. WILLEVER FIRST VICE-PRESIDENT NEWCOMSB CARLTON CHAIRMAN OF THE BOARD WHITE PRESIDENT The aling time shown in oe date line on telegrams and day letters 1is STANDARD TIME at point of origin. — Cable Night Letter Ship Radiogram KH105 i hi ; 17 =GH v £2 kJ tA J tat 7 Vi iN i si Ac MO iG INGTON DC 14 t i oh) P ne ere NN jes New SI LOUIS TON GHT Ni li fy NY UO) > ww TO ATTE * % Fa i \] +3 V mee, i it fil bE RAPD il ¢ it RITE FULLY tht> 3 Tae Bs at ie iD 4h} $e PRE 3 B 2 as US RUSSE Ls i 4 OND AY At ivi a OVER 4fx? ( Time of receipt isSTANDARD TIME at point of destination. FD re A f- GAR a ‘ os THE QUICKEST, SUREST AND SAFEST WAY TO SEND MONEY IS BY TELEGRAPH OR CABLE \ Py eo Om AUVOS OT c.) Mr. J. & Russell Browning Arms Company et. Louis, Missouri iy dear and will our John: ve have friends them get in act. to no word yet Washington and therefore be glad to from Washington see if have Sincerely TH RDI: DAI Cow PB ipey CC ~ P. S.. came. & yy Browning. Gordon Since you call on your Letter you can yours, ETCH BR & YOUNG the foregoing, 6 Co, Baxter iLléhave I dictated no further suggestions to make except possibly to suggest tha t you Let them know you have ng node: the trip to Washington for the purpose of trying to get action. iir. Re el es, op Mr. Clayton, end LLP» Bosseard may be able to he help you with some suggestions, Your letter on another matter is pressin studying that poss ¥ | so ance 1 an n cs also arrived, but compelled to delay THATCHER ROY D. THATCHER LE ROY B. YOUNG PAUL & YOUNG LAWYERS SECURITY BANK FIRST THATCHER BUILDING OGDEN,UTAH March Chief Counsel of Washington, D. ATTENTION A. eony the T. Bureau Clark, Civil Division mail The the of this decision 19389 of Revenue Browning Arms Company v. Thomas J, Sheehen, Collector Excise Taxes United States interesting in the the us brought morning of Internal Esquire Ret Clarks Mr. Dear 3 Cs. 14, PRENTICE-HALL Circuit Court of Appeals Second Circuit rendered March 6 in the case of It appears in paragraph 5.256 of the 1958 Smith v, Higgins. The Court there allowed PRENTICE-HALL Federal Tax Service, 1932 as the result of a in @ loss sustained by the taxpayer the stock corporation, a sale of securities made by him to few shares the and him, of which was practically all owned by not owned were controlled by hin. It because the corporation to by greater part paid him was corporation. the which Arms especially is the Company J. for M. That, & M. the Browning case the means of the purchase prics which the paid by a credit on his obligation 5. arms the you will which it Browning reeall, Company bought. wes paid the Browning The case is also interesting because it differentiates case Gregory v. Helvering, 296 U. &. 465, saying, "Though the help of not is it ment govern the by on relied just mentioned is within to it for it hed to do with a pretended organization not it that in s differ case t presen The e. the scope of that statut involves a real sale to an actual buyer." “now of The ease from any is valuable es being the latest Circuit Court of Appeals, Yours truly, & THATCHER Roy De YOUNG Thatcher aa 4 G rm i S bE z RE a waees ; rm aty ; - i tee, raSigesSte, > | : . 7 ‘2 ta? hie Pid 4 n o oh OOD da GRY. a Ve CS > sin ween #s 2 2 i> js o-%% ay %Bh ae“*»Be wets BPG Te Y m it one © dicciicndiienibeed ‘ 5 Lew) as .. a A wh io o tf Be a ke lr. Roy Thateher, c/o Thatcher and Young, First Security Bank Bidg., e™ Dear Roy's : I heve just kind carefully read your supplemental did a very good job of prepar~ ussion of the Pickwick case especially in view of Urs ence to it, Thank you very py of the above to mas regards, ad Sincerely yours, cle me; Be 22 Ae & OF em: oa TILE =) > P % tv; : ff ‘a February d.8. Russell Browning Arms St. Louis, Dear J.k. Mo, 20, 1959 Co. As you doubtless know, the over-payment made by the Arms Company in October has been the subject of considerable discussion in the light of the various angles to the situation. Upon receipt of the auditor's report the matter was again discussed in connection with interest charges and the It finally resulted in an various phases of the tax laws. analysis by Mr, Thatcher and as a result he wrote a letter on the 18th a copy of which is inclosed. Referring follows: the to your letter of October 18th beginning Inclosed is a formal letter “Dear Boys: attached remittance, and We etc." are unable as regarding to find the letter referred to and would appreciate it if you would Our reasons for requiring it is to determine send a copy. what your reasons were for believing that it served as an "excellent example of how the accounts of both corporations are kept separately, is nothing more that there is serve to on file. and can anything in the strengthen such As Mr. etc." be done about Thatcher says, the matter, but there if aforementioned letter that would a position we would like to have I am in hopes that the forthcoming analysis ana connection with bookkeeping will take me out of sion once and for all. é Sincerely, it change in that profes- THATCHER ROY D. THATCHER LE ROY B. YOUNG FIRST THATCHER BUILDING OGDEN,UTAH February J YOUNG af & Ogde M. S. Utah Attention: Browning Company M. Browning Mr. A. 18, Gentlemens: Yesterday Mr. Baxter discussed with me the overpayment last year by the Arms Company of its accowmt with you, the matter having come to his attention again because of the audit recently received from St. Louis. He has now supplied me with letters from Mr. Russell dated October 18 November 9, 1958, your letters to Mr. Russell and November 5, 1958, and Mr. Baxter's letter of November 8, 1938. matter. As trans saction ness on if between they do not and it you the were say know what in your indicates two not more letter, a any way it failure corporations in can in a be is to done way affiliated. of to not about a and the businesslike carry it October 29 Mr. Russell on the would be However, busi- Mr. carried Bax- Company as doing the business of the Perhaps I should add that it alone which is involved. All question parent O MN i) i OMWctkr © Ps CT ye a O° ship between the corporations to establish, if it can, the two corporations, themselves, have not done business if they were separate entities, but have rather treated Arms T =a Os unt 14 but a ee serious; re is our controversy over exci cis e States to inguire into th ct situation ct the Det. tre ® if tn IT doubt are entirely through with it is open for the United ry ter directs in his letter of November 8th that the over-— payment be absorbed during the month of October by applying it upon obligations of the Arms Company which he hoped would arise in that month. 4) PAUL & LAWYERS SECURITY BANK company. is not only the tax the advantages which arise from separa te incorporation may be lost by the failure to keep the business of each separate from that of the other. Occasionally in my general reading I run across cases where the courts have called attention to the meticulous care re- quired to been done tected. maintain the each advantages in of its own separate sphere, and when incorporation that are has pro- ck er XY © e; Pienl 4 te FS ' @ Wi 0 © lan +a GOO In AW rlowe anding rable OX » for alone number \ ver b often are +15 courts fi Oot ohnat & 3s Yours referred truly, CO. ha Serious. the wm Lod D Ct 5 a? rr °0Q2 | React © ct c+ — fin MD 5 ct te ) 3 Q2 CT OD cori Pact TS to ean 25: but tT ON ct = pected @ account e uM ulative ae J. M. & M. S. BROWNING OGDEN. UTAH CO. February Mr. Matt S. Browning, Postale 20, c/o Mr.Chas. Boite Herstal, Dear 17,1939, Delvaux, Belgium. But: Supplemental Enelosed herewith is a copy of Mr.Thatcher's Brief relating to the Excise Tax ease. in It strikes me as being and I like the way it our lot of we are favor very strong argument is presented, Do not fail to read it because there is a good sound law in it as relates to taxes such as confronted with right along, That report that Winchester is expecting to have an Automatic on the market this Fall has started us figuring. Inasmuch as we shall doubtless be ordering fewer Automatics for next year, we are wondering if we should again think of getting the 20 gauge Super to make up the lost volume. One of the worries to me is that which we have discussed before, namely - how the 20 will effect the sales of the l2, Trusting everything is Sincerely, MAB 4 MS Enel, going along, lan V al a a | (2 aah 7 2 ti a a a aN \ ey On ei aan, Ste Louis, Mo. February 8, 1939 (Dictated February Mr. c/o Me Je Ogden, Dear Roy A. Me Browning, and Utah Me. 5. Browning Co., Marriner: Enclosed are copies of letters from and to Thatcher in whicl think you will be interested. 7) February 8, 1959 tated February Pe ig Tt st. an ve LA Pe SiG a by Ly gags a CONCH, Yours: Se f+ wy Bank Raia Bladeip 2 3s Sot int Browning insurance, Arms such as Company office owns property equipment, cun a ey th aticoca: , though for which > principal ned been pai sary that the insurance be neces fact im orectical, $t iia iste %. a oe 2 er of é probab Soae You Se ants compan both of nemes the written in ac wh OF this in completing your brief, which I note with a . » * the to ihave in ee a ae expected én mail by January = 20th. foe: sudy of the case I eam glad to note that further confidence and thet you are mMOFe enc iraced you increas ¢ ing yor about the cases 7 1 met Mr. Edwards, Deputy Collector, on the street a few deys ago and he inquired what the present status of the case we an’ indiseted that he expected some kind of a settlement, accordi bo advice he hed from Washington , but nothing definite had come I have not seen or. Lope since I last telked to yous shroug! a} wee some iid word base come through “ wn taal sent oi; and a copy aco he time Irom Pe ay Hoyt, though I wrote ey %. 4 to Gordons he de letter Sincerely yours, hin op 7th) ? * THATCHER ROY LE D. THATCHER ROY PAUL & YOUNG LAWYERS B. YOUNG FIRST SECURITY THATCHER BANK BUILDING OGDEN,UTAH February ae = 6, 1929 Hoyt es Tax Division Internal Revenue 5ws 6 st. we BEEw | fe Louis, f » Browmming iLesouri Na? he Riis Company, You will recall that about November 29th, Mr, “usseli, Mr, Baxter and I called on you on behalf of the $$ above named company, seeking the determination by the oumissioner of a price under Section 619 (b) 2) of the Revenue Act of 1952 which should form the basis for the levy of taxes on the ne of shot guns, At that time you piingested that if we should not hear from you regard ing the we shall matter it to your purpose, by the attention, niddle We are of January, writing we might this letter Yours truly, THATCHER CCs that if there is any additional informati Q H: you need, be glad to Puen tah it to you if you i EL advise US » RD? sT call for J. Me. St. Louis Missouri, Mir. Gordon Baxter 1162 Ogden, Ogden, & M. Spruce S. Browning Street Utah Utah and Roy D, Company at & YOUNG C0 First THATCHER & YOUNG Security Bank Building Ogden, Utah January Mre Je E. Russell, OC e Louis, Dear Johns: Browning Arms Ff Vice Company, 26, 1939 President, MO Thanks for your letter regarding insurance. I was just completing my brief to file with Mr. Clark and did not remember definitely what you said about the insurance. If it had been written entirely in the name of Je Me & Me S. Brovming Company, I wanted to say so, because that would have been definitely in our favor, though it would not have been neces-= sarily against us if it had been carried in the name of Browning Arms Company alone. There are many cases holding that the consignee under a factor contract may carry insurance in its wn name where it is required to keep safely the consigned properly. You probably feel that I am late in getting the brief out, but absence from the state and illness delayed me and, as you know, there are always things coming up which cannot be delayed. I have tried to find every case since our former brief and have gone back to some decided earlier than that because they seemso helpful. I feel more encouraged than ever about the case. My brief has been dictated and most of it is transcribed. It ought to go out before the end of this week, though some of our clients are requiring legislative acts to be prepared for immediate presentation to the legislature. I don't think, however, they are going to delay us. I don't suppose you have heard esnything from Mr. Hoyt. I have itm my calendar to write him the end of the month. remember he suggested we write him by the 15th. With kind regards, sincerely yours, THATCHER AND YOUNG STONED) IGNED) RUE ROY 7D. (S THATCHER LoA'L CHER You @) COPY. FOR YOUR FILES|@ SCHOLEFIELD, J. B. SCHOLEFIELD, C.R.A.,A.C.A. CERTIFIED SEYMOUR WELLS,C.P.A. LYNN E. BAXTER,C.P.A. FIRST WELLS PUBLIC SECURITY BANK: OGDEN, January Mr. A. J. Benner, c/o Benner, 317 Dear Mr. letter N. Mayors & BAXTER BOISE,IDAHO ACCOUNTANTS AND BUILDING LAKE CITY, UTAH —LOS ANGELES CALIF. YORK CITY — CHICAGO WASHINGTON,D.C. 1939 & Company, Bleventh St. Louis, Street, Missouri. Benner: We dated Arms Company December a the months of October, setting up this November wish 31, to 1938 acknowledge advising receipt that contingent and We amount December, liability for November additional and December, believe that an 1938. This is the as applicable error to the of the had set up on their books an amount covering your Browning of $5,214.74 excise tax for been made in 1938. has months exact of figure ing the tax for the three months of October, November ember of the year 1935 and which, in our letter dated 8, — SALT OAKLAND, AGENCIES NEW UTAH 3, OFFICES SAN FRANCISCO 1938, we requested the Browning Arms Company to set October, cover- and DecNovember up as Mr. Browning specifically wanted the total contingent liability shown upon the books. Inasmuch as this amount relates to a prior year, do you not think that it would be a proper charge to surplus account. | appreciate hearing further you upon you you upon were We would have liked very much to have the occasion of our recent visit but understand vacationing in Florida. compliments of this Would greatly question. from the With kind regards, season, we are, and Very yours, truly BAR wishing you peed seen that the brects ¢ Figen