exclusion applies to the value of land or other property contributed to a corporation by governmental unit or by a civic group for the purpose of inducing the corporation to locate his business in a particular community or for the address the condition situation here where you have completely unrestricted cash grants and discussing your cation juice and talking about other property and it also doesn't deal with a situation where in addition to dustan the move the transfer expected to receive a direct benefit as is also the case in this situation the regulation doesn't comport to displace the sea being to analysis from the supreme talking about land and property in expander stood there that the land of the property would be used as part of the relocation as was the case in the cake product for a plant was transferred to the brown sure there was about nine hundred thousand dollars cash in property namely cash transferred to the to the tax care there in consideration and the requirement that engaged in capital improvements buildings and equipment there was a small portion about one percent ten thousand dollars that was transferred to the court noted free of a contractual acquirement that it invested in capital improvements what the court emphasize is that the total amount was less than the now cash supplier to engage in the kentucky required capital improvements even with regard to that ten thousand dollars it was understood that it would be part of  sort of the kind of generosity the full benefit to the community at large or the to the state at large is is not the type of benefit contemplated under chicago but here it's your position this is a direct benefit because the state  how do you deal with the interplay between intent of the transfer or and use by the transferee when you look at the chicago burlington and quincy case they they go back and forth and ultimately i think it's expenditure but that's not the way the case is read and that's not nice and that's not the way the regulation reads what's the background to why the focus is on me dumb question time but why is the focus on intent of the transfer or as opposed to use well i think the focus is and it again comes up in the context of non shareholder conservation the capital is the question is should someone who is not a shareholder simply be treated as a shareholder that makes a contribution the do st i think thank you we're focusing still on chicago but when you look at the factors that set forth their total of five in the one the last one being characterized as would says on page four hundred and thirteen of chicago burlington we can distill from these cases some of the characteristics of a non shareholder contribution it certainly must be a permanent part of the transferees working capital structure that seems like ok it may not be compensation man you're right on the nd one was that it must be bargained for the asset transferred must result in benefit and the asset ordinarily if not always will be employed or or contribute to the production of additional b and q doesn't seem to get it really doesn't tell us directly conjunct a disjunctive i just i just don't know what one question i don't judge people it's not a question about the duty of for any promise to construct in new jersey we summarized the testimony on pages nineteen to twenty providing the size of our reply brief with the new jersey represented emphasized in this case trial that there are other new jersey programs that dependent on capital investment but this is not one of them this program is about job creation and if they could create a job with no capital investment that would be find a way that would have no impact on the grant they need to spend a they sold improvements and that capital investment in this program unlike other programs with ultimately immaterial and brokers had only consultants mr lacy testified to this program to perform its base and the to capital should we take anything from the fact that the language of the statute has changed afterwords we have not made an argument on the basis of that other than to say that it is that the ruling in this case working capital a problem with the language from the the case law is a permanent part of working capital structure and what that means is the money that actually invested in the business it's not going to be used got we've got the facts here and so the total amount of new jersey payments to protest received was i guess about one hundred and seventy million is that correct right around there that's correct  people and increased its hours they've now turned out to be a lot more so what then do you make of the statements in the edwards and brown shoe cases noting that the non shareholder payments there were in all instances less than the amount expended on the capital assets that the government was trying to create in those cases and edwards it was a railroad around she was a factory right and i think it's important to note that in brown shoe the stipulations below if you go back to the tax court opinion show clearly that the parties stipulated in that case that the amounts were not restricted and so the and the court made a point of that because it said ultimately that the taxpayer was allowed to claim basis in the assets because they expended its own unrestricted funds on on those assets and of course the underlying explicitly had to be limited to the amount that was expended on hard assets and as the court has said in mackay products case the issue is whether the amount is intended to become part of the working capital and working capital is not restricted to buildings or machineries as the tax court here observed it can be other things that are important to the operation of the business and in the case of products definition of working capital says it's the amounts that are used for the business to carry on its activities and that's obviously going to depend on the type of business you have played  permanent part of working capital structure and working capital i don't see a significant difference between those two are the i don't think a permanent part of working capital structure means this company can never pay another dividend what it means is the company is going to be like brown shoe where the conclusion is that based on all the facts and the fact that the intent here was to benefit the community at large teleservices was only valid case you'll see that they actually went through this analysis when they said that for that we know there was an intended to be a community benefit that was for that reason that was held to be a contribution to  commercial relationship and the payment was related to it had a nexus to that commercial relationship or wanted to sell more cars so it helped them to move their location but in this case there's no to there's no commercial relationship at all between the taxpayer and the state of new jersey who are not offering any services to the state of new jersey stated knitters is not asking us to provide any services and the payments the benefit of the state of new there's more of a tax base those benefits and then your point of view than any donation or transfer by government because there's no commercial relationship to a private entity would always be a capital guarantee that you will receive an adequate return on operation and guarantee here in coming that way but this is not a case where there was a commercial relationship and it is not a case certainly where there were finding by the by the government making the payment that they needed support of broker tat in fact quite the opposite the deed program was designed to bring into new jersey very financially successful companies that paid a high wages to employees that would look be innovative neuters and generally benefit the local economy so it was not a situation where they were trying to guarantee the income of this attack payer funds is in three ways they can receive it through daf which is obviously not taxable they can receive it through contributions to capital which happen every day obviously or not taxable the corporation upon receipt and then the st cd in cuba issue which he began to seem to say at least that one is required don't keep a railroad in texas pacific railway beside the issue so when i look through this there are no restrictions on the use of cash payments everyone agrees the payments were not calculated based on capital investment costs new jersey did not transfer any land or building with the cash payments and the the payments are substantially larger than the amount transferring the land or buildings or hard assets with the cash so there's a portion of it that's just rooted there and here it's entirely under strict catch so one of the things that th a manufacturing company like ground shoe working capital is very much tied in pop in factories machinery etc but in our modern economy many businesses have working capital does not tie it up in harvest facility we stipulated that they were not restricted so there's been no change in position moreover the parties were the stipulations included a stipulation that even there is even if there is not a bar automatically if it's not restricted it can't be a contribution of capital we have to look at the context in which this event happened and they state goal yes you're correct the state  to invigorate the economy and it did so by this mechanism of and courage ing businesses to come here but the way that it calculated its award was based on payroll tax and it appears that even if you could use the money for whatever purpose you wanted doesn't that also convey it's not going to be part of the permanent capital structure it can be used however you choose and therefore it's not consistent with the st factor of chicago and in addition it was measured by payroll taxes which is testimony that demonstrates that we have the mechanisms the tactics of this program and how could we ignore that the grant was measured by people taxes which is an operating expense and that the money taken together with the fact that the funds that  were received could be used for any purpose and has not part of the permanent capital structure don't those two matters together make this different and therefore not a contribution capital  amount was under the program based on the income tax withholdings and we said not our taxes but the taxes of our employees that would be submitted to the state of new jersey compute the amount in this way the reason they did that is because they want to make sure that this program was cash flow positive just by in the case probably the conditions of getting the grant had to be satisfied before the contribution there was transferred so in mccabe products there was a building that was transferred but the transfer of the building would not occur and tell this the community  gotten the benefit that they wanted which was the payment of five million dollars of wages only after the payment of five million dollars of wages under the original contract was later waived but under the original contract only after the payment of five million dollars and it doesn't look as if the p d grant required the monies to be placed into a capital account and so that would seem to suggest an intent to provide additional income to broker tact rather to contribute to his permanent working capital structure that's that's the concern that you're hearing from us right and the cases that involve income being paid to these cases are basically category of income that a the corporation to see that we all know is taxable income from operations where the branch you pay says is when we don't have that kind of commercial relationship or rather we have a concert where we have this payment this being made to a corporation in order to induce it to do something that doesn't have a direct nexus to a commercial relationship that then we have for another purpose we look at all the facts and we have for another purpose and that's what the tax court did here and looked at all the facts and it is for a purpose that was not to make a payment in the context of a commercial relationship but rather to add to the working capital what the i r s is saying in terms of restricted to a capital it doesn't mean that the funds have to be marked with a fee and put in a suitcase and locked away forever and never used on anything working capital as this quarter preserve i must improve the safety associated with your railroad and we're going to pay you the cost of doing that but there was no benefit to the railroad they said the benefit to the railroad was marginal so there was no effort to give anything to the railroad of any value there was no effort to add to its ability to generate income but here there is an amount that is made available to the company it's not in the context of mercury relationship it's in the context of saying you move to our jurisdiction you benefit our community and luke make these funds available to you so that you can generate further income in your business and that's the way we deployed it that's the way and that's the argument and then just to split the cost easily but again thank you very much very interesting character and will take the matter under advisement