Reporter's Statement of the Case 100 C. Cls. 8. The money required to meet the agreed cash payment was borrowed by plaintiff from the partnership of Singer, Schlein & Cohen. 9. Simultaneously with this further loan to plaintiff by Singer, Schlein & Cohen, the partnership of Singer, Schlein & Cohen subscribed to 1,080 shares of the no par value stock of plaintiff and paid therefor the sum of $213,000. Such payment was made by reducing the amount of plaintiff's indebtedness to the partnership by said amount. To permit the issuance of the additional 1,080 shares, plaintiff on October 15, 1930, filed a Certificate of Increase of Capital Stock, pursuant to section 36 of the Stock Corporation Law of the State of New York. After December 4, 1930, and at all times relevant to this proceeding, plaintiff's outstanding capital stock consisted of 1,200 shares of its no par value stock, which was subscribed to and held as aforesaid. 10. During the period of plaintiff's existence prior to July 1, 1932, plaintiff received dividends in various amounts on its holdings of stock of Cedar Grove Cemetery Association, and used such dividends to discharge, in part, its indebted ness. 11. On July 1, 1932, plaintiff owed $175,000 in principal amount on the notes given by it to the prior owners of the stock of Cedar Grove Cemetery Association. In addition, it owed $482,096.13 on loans made to it by Singer, Schlein & Cohen. It had cash of $1,167.98 in its treasury. During the taxable year ended June 30, 1933, it received dividends from Cedar Grove Cemetery Association and made disbursements as follows: December 5, 1932- To Singer, Schlein & Cohen in repay- $74,000.00 164 Reporter's Statement of the Case 12. On July 27, 1932, plaintiff borrowed from Singer, Schlein & Cohen the sum of $29,000 and used the said sum to pay on August 1, 1932, the sum of $28,750, representing principal and interest due on its purchase money notes, retaining in its treasury the excess of $250. On October 25, 1932, plaintiff borrowed from Singer, Schlein & Cohen the sum of $1,250 and used the said sum to pay, on the same date, interest of $1,289 due on purchase money notes. The excess of $39 was paid out of money then in plaintiff's treasury. On April 27, 1933, plaintiff borrowed from Singer, Schlein & Cohen the sum of $1,000 and used the said sum to pay interest of $1,269.50 due on its purchase money notes. The excess of $269.50 was paid out of money then in plaintiff's treasury. 13. During the taxable year ended June 30, 1933, plaintiff also paid to the State of New York a franchise tax in the amount of $747.93. 14. On July 1, 1933, plaintiff had cash of $1,211.39 in its treasury. During the taxable year ended June 30, 1934, plaintiff received dividends from Cedar Grove Cemetery Association and made disbursements as follows: Date January 6, 1934. June 12, 1934.... Dividends received Amount $74, 568. 75 89, 482. 50 ment of loans. Date Disbursements Description Amount January 6, 1934. To Singer, Schlein & Cohen in repay- $74,000.00 June 12, 1934___ To F. H. Walker, Executor of the 20, 500.00 June 12, 1934_. Estate of F. Walker, in payment 69, 000. 00 15. On July 24, 1933, plaintiff borrowed from Singer, Schlein & Cohen the sum of $1,000. On September 13, 1933, plaintiff borrowed from Singer, Schlein & Cohen the sum of $106,000 and used the said sum, plus $739.22 out of its treasury, to pay on September 14, 1933, principal and interest on its purchase money notes in the amount of $106,739.22. On No Reporter's Statement of the Case 100 C. Cls. vember 13, 1933, plaintiff borrowed from Singer, Schlein & Cohen the sum of $1,000 and used the said sum to pay on the same day interest due on its purchase money notes in the amount of $1,375. On May 6, 1934, plaintiff borrowed from Singer, Schlein & Cohen the sum of $1,000 and used it to pay on the same day taxes due to the State of New York in the amount of $862.43, and interest due on purchase money notes in the amount of $687.50. The excess of the disbursements of November 13, 1933, and May 6, 1934, over the loans on the same dates was paid out of money then in plaintiff's treasury. 16. On July 1, 1934, plaintiff had cash of $1,073.31 in its treasury. During the taxable year ended June 30, 1935, plaintiff received dividends from Cedar Grove Cemetery Association and made disbursements as follows: January 9, 1935---- To Singer, Schlein & Cohen in re- $100, 000. 00 payment of loans. February 18, 1935- To F. H. Walker, Executor of the May 8, 1935.. Estate of F. Walker, in payment 22, 500.00 1,782.50 687.50 November 3, 1934 To F. H. Walker, Executor of the Estate of F. Walker, in payment December 31, 1934- To New York State Tax Commis sion-tax 2.00 on corporate divi 26. 60 March 25, 1935------ To Murray E. Schlein-Expenses in defence of claim against plaintiff for taxes alleged to be 164 Reporter's Statement of the Case 17. For some years prior to July 1934 the dividends payable on two blocks of 50 shares each of Cedar Grove Cemetery Association stock had been unclaimed. The accrued and unpaid dividends then amounted to $2,800 on one such block of stock and $2,146.25 on the other such block of stock. On July 2, 1934, plaintiff purchased from one Trenkamp the 50 shares of stock on which the unpaid dividends amounted to $2,800. Under the terms of the purchase plaintiff became entitled to any accrued and unpaid dividends on such stock. The purchase price was $4,737.50, and to make the agreed payment plaintiff borrowed $2,000 from Singer, Schlein & Cohen, and also used $2,737.50 of the dividends of $2,800 which were paid to it by Cedar Grove Cemetery Association. 18. On August 16, 1934, plaintiff purchased from one Moller the 50 shares of stock on which the accrued and unpaid dividends amounted to $2,146.25. Under the terms of the purchase plaintiff became entitled to any accrued and unpaid dividends on such stock. The purchase price was $3,700, and to make the agreed payment plaintiff borrowed $2,000 from Singer, Schlein & Cohen, and also used $1,700 of the dividends of $2,146.25 that were paid to it by Cedar Grove Cemetery Association. 19. On July 1, 1935, plaintiff had cash of $3,374.31 in its treasury. During the taxable year ended June 30, 1936, plaintiff received dividends from Cedar Grove Cemetery Association as follows: Dividends received Date January 8, 1936. June 8, 1936.... Amount $119, 910. 00 89, 932. 50 Of the above dividend of January 8, 1936, the sum of $78,163.85 was disbursed on January 9, 1936, in full payment of the balance of the loans due to Singer, Schlein & Cohen. The plaintiff's liability on purchase money notes had been liquidated in full on February 18, 1935. The balance of the dividend of January 8, 1936, was retained by plaintiff in its treasury. The dividend of $89,932.50 received by plaintiff on June 8, 1936, was retained by plaintiff in its treasury. During this year plaintiff also expended small sums in pay Reporter's Statement of the Case 100 C. Cls. ment of capital stock tax, New York State franchise tax, and for attorney's fees. On June 20, 1936, plaintiff declared and paid to its stockholders a dividend of $120,000. On June 30, 1936, plaintiff had in its treasury cash of $11,009.16, all of which was on deposit with Irving Trust Company of New York City. 20. The receipts and expenditures as set out above are a complete statement of all receipts and expenditures by plaintiff during the period from July 1, 1932, to June 30, 1936. 21. The sole asset owned by plaintiff between July 1, 1932, and June 30, 1936, aside from the cash in its treasury from time to time, consisted of stock of the Cedar Grove Cemetery Association. The only income of plaintiff over the same period consisted of dividends on the stock of Cedar Grove Cemetery Association. 22. Plaintiff has always kept a set of books consisting of its check book, cash book, journal, and general ledger. It maintains additional records consisting of its minute book and its stock certificate book. It has never had any clerks or any employees other than its officers. It has never paid any compensation, directly or indirectly, to any officer, stockholder, or employee. It has never had a listed telephone. Plaintiff has never had any stationery bearing its name. It has never sold any of the stock of Cedar Grove Cemetery Association, which it acquired in pursuance of the purpose of its organization, and still owns all of it. It has never maintained an office. Its address has at all times been 7800 Myrtle Avenue, Brooklyn, New York. This is the office of Mt. Lebanon Cemetery. The plaintiff's president, Murray E. Schlein, is associated in the management of Mt. Lebanon Cemetery. 23. The officers of plaintiff and of Cedar Grove Cemetery Association during the calendar years from 1932 to 1936, inclusive, were as follows: |