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MONTGOMERY ENGG. CO. v. UNITED STATES

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY


June 17, 1964

MONTGOMERY ENGINEERING COMPANY, William Hecht and May Belle Hecht, Plaintiffs,
v.
UNITED STATES of America, Defendant

The opinion of the court was delivered by: WORTENDYKE

This case was tried to the Court without a jury. Jurisdiction in this Court derives from 28 U.S.C. ยง 1346(a)(1).

Plaintiff, Montgomery Engineering Company, a New Jersey corporation (hereinafter the Company) with its place of business in Jersey City, seeks a refund of alleged overpayments of Federal Income Taxes for the calendar years 1957, 1958 and 1959, for assessed deficiencies based upon disallowance, as non-deductible corporate expense, of payments made by the Company to the surviving widow of Oscar T. Nicholson, a deceased Executive Vice-President and stockholder of the corporate taxpayer. Payment of the assessed deficiencies was made on May 12, 1961, and claims for refund were filed on May 22, 1961 with the District Director of Internal Revenue at Newark, New Jersey.

 Plaintiffs William Hecht and May Belle Hecht are husband and wife, citizens of the United States and residents of New Jersey. Deficiencies based on their failure to include in William Hecht's income, as a dividend, the Company payment to the widow, were assessed against the Hechts on May 5, 1961 with respect to the amount of Federal income taxes paid by them in a joint return for their taxable years 1957, 1958 and 1959. These deficiencies were paid on May 11, 1961, and claims for refund thereof were filed on May 22, 1961 with the District Director of Internal Revenue at Newark, New Jersey. Mr. Hecht was the founder of the Company and its president until 1960, when be became Chairman of its Board of Directors. By written stipulation filed in this cause, the parties have agreed that if the amounts on which the deficiencies were assessed constituted distributions to Mr. Hecht, then, for the purpose of determining the extent to which such distributions constituted dividends, the earnings and profits of the Company, all of which had been accumulated subsequent to its organization in June 1929, were not less than the following amounts on the dates indicated: January 1, 1957 $ 412,727.65; Dec. 31, 1957 and Jan. 1, 1958 375,873.86; Dec. 31, 1958 and Jan. 1, 1959 424,210.27; December 31, 1959 487,617.36.

19640617

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