8 T.C. 987 (1947)

r
r

A personal holding company is liable for a 25% penalty for failing to file a personal holding company income tax return when it fails to demonstrate reasonable cause for such failure, even if more than half its stock is held by the Alien Property Custodian.

r
r

Summary

r

The Nirosta Corporation was assessed a 25% penalty for failing to file a personal holding company income tax return for 1942. Nirosta argued that because more than half its stock was held by the Alien Property Custodian due to wartime vesting orders related to its prior German ownership, it had reasonable cause for not filing. The Tax Court upheld the Commissioner’s determination, finding that Nirosta had not demonstrated reasonable cause for its failure, despite being aware of its potential status as a personal holding company. The court emphasized that the imposition of the penalty is mandatory unless the taxpayer proves both a lack of willful neglect and reasonable cause.

r
r

Facts

r

Nirosta Corporation, originally named