TAXATION: Foxy Reynard

Creator of such familiar personalities as The Toonerville Skipper, The Terrible Tempered Mr. Bang, Aunt Eppie Hogg, The Powerful Katrinka, and Mickey (Himself) McGuire is a mild-mannered little newspaper cartoonist named Fontaine Fox. Last week the U. S. Board of Tax Appeals handed down a decision on a less familiar but equally profitable creation of Cartoonist Fox known as Reynard Corp.

In 1924 Mr. Fox formed Reynard Corp., with himself as president, his brother Barton and his lawyer, C. E. Kelley, as fellow directors, and $60,000 of his own cash and bonds as capital. President Fox thereupon contracted to sell Reynard Corp. his services as a cartoonist for $30,000 a year. Reynard Corp. in turn contracted with the Bell Syndicate to sell the Fox drawings for $1,500 a week, later raised to $2,000. With its profits Reynard Corp. built President Fox a house and studio at Roslyn, L. L, paid his life-insurance premiums. When suspicious Internal Revenue agents learned that Reynard Corp.’s only dividend was $20,000 given to President Fox to invest in Florida real estate, they began an investigation which landed Mr. Fox in the Board of Tax Appeals office in New York. Finding that Reynard Corp. had been formed to accumulate earnings instead of distributing them, and was thus liable under a 1918 statute to an additional tax of 50% of its net income, the Board ruled that for 1932, the year in question, Reynard Corp. should have paid $26,064.02 instead of $4,688.94, ordered Reynard Corp. to produce the difference forthwith. Commented Judge Sam B. Hill of the Board of Tax Appeals: “Mr. Fox looks a little foxy himself.”