Source: http://openjurist.org/538/f2d/790
Timestamp: 2015-10-13 16:55:03
Document Index: 132527247

Matched Legal Cases: ['§ 48', '§ 48', '§ 48', '§ 48', '§ 38', '§ 46', '§ 48', '§ 48', '§ 167', '§ 48']

538 F2d 790 Yellow Freight System Inc v. United States | OpenJurist
538 F. 2d 790 - Yellow Freight System Inc v. United States HomeFederal Reporter, Second Series 538 F.2d.
538 F2d 790 Yellow Freight System Inc v. United States 538 F.2d 790
76-2 USTC P 9478
YELLOW FREIGHT SYSTEM, INC., Appellee,v.UNITED STATES of America, Appellant.
Submitted March 10, 1976.Decided June 15, 1976.
William A. Whitledge, Tax Div., Dept. of Justice, Washington, D. C., for appellant; Bert C. Hurn, U. S. Atty., Scott P. Crampton, Asst. Atty. Gen., and Gilbert E. Andrews, Jr. and Gary R. Allen, Attys., Tax Div., Dept. of Justice, Washington, D. C., on brief.
George E. Gibson, Kansas City, Mo., for appellee; Reece A. Gardner and Sheryl B. Etling, Kansas City, Mo., on brief.
This suit was brought by Yellow Freight System, Incorporated (hereinafter taxpayer) against the United States to recover federal income taxes and assessed interest in the amount of $203,498.76 for the taxable years 1963, 1964, 1965 and 1966. The controlling issue on this appeal is whether certain docks, dock additions and inspection lanes, constructed by the taxpayer in the years at issue, are investment credit properties within the meaning of section 48(a)(1)(B) of the Internal Revenue Code, 26 U.S.C. § 48(a)(1)(B) (1970), as amended, 26 U.S.C. § 48(a)(1)(B) (Supp. IV, 1974) (hereinafter § 48(a)(1)(B)).1 Resolution of this issue depends on whether the structures are "buildings" under § 48(a)(1)(B) and thus ineligible for the investment credit. The court below held that the structures are not buildings and entered judgment in favor of the taxpayer.2 We reverse.
The investment credit provisions of the Code, 26 U.S.C. §§ 38 et seq., allow a credit with respect to certain qualified investments in depreciable property. At all times relevant to this lawsuit, the credit was allowable in an amount equal to seven percent of any qualified investment under § 46(a)(1).3 Section 48(a) of the Code defines the property, termed "section 38 property," which qualifies for the investment credit. During the years in question, § 48(a)(1) read as follows:
(1) In general. Except as provided in this subsection, the term "section 38 property" means
(B) other tangible property (not including a building and its structural components ) but only if such property
(C) * * *.
Such term includes only property with respect to which depreciation (or amortization in lieu of depreciation) is allowable and having a useful life (determined as of the time such property is placed in service) of 4 years or more. (Emphasis supplied.)
In the years 1963 through 1966, Yellow Freight caused to be constructed thirteen docks, nine dock additions and four inspection lane facilities. In each instance the taxpayer claimed, and the government denied, an investment credit for these facilities, the cost of which varied from a low of $6,599.77 to a high of $530,487.89.
The parties stipulated that the properties in question qualified for the full investment credit in all particulars except one. The structures at issue were, when constructed, and are now, "other tangible property" under § 48(a)(1) (B). Depreciation was allowable with respect to the properties when each was constructed and each had a useful life of eight years or more for purposes of computing depreciation under § 167 of the Code. The properties were at all relevant times used by the taxpayer as an integral part of furnishing transportation services under § 48(a)(1)(B)(i). The only remaining question then, and the point upon which the Service denied the credit in each instance, is whether the structures are "buildings" which are ineligible for the credit.
Taxpayer is a common carrier of general freight operating in interstate commerce. The company hauls general freight by motor truck over ICC certified routes in Arizona, California, Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Missouri, New Mexico, Ohio, Oklahoma and Texas. Taxpayer uses terminals along these routes in order to expedite the transfer of freight.
The transportation services which taxpayer provides are divided into the following four categories: outbound service, inbound service, break bulk operations and interline operations. In performing its outbound service, taxpayer's trucks pick up goods from a customer within the commercial zone which a terminal serves. Freight is taken by truck to the terminal and transferred to an outbound long-haul trailer for delivery to other destination cities. Inbound service is the opposite of outbound service. Long-haul trailers arrive at a terminal carrying freight destined for customers in the commercial zone served by such terminal. Freight is transferred to other trucks which deliver it to the customers within the commercial zone. Break bulk operations, which take place in Albuquerque, Baxter Springs (Kansas), Dallas, Indianapolis and St. Louis, involve the transfer of freight from inbound long-haul trailers to outbound long-haul trailers. Interline operations involve freight which is transferred from a trailer of another carrier to outbound trailers of the taxpayer.
The method of freight transfer is similar in each case. An arriving vehicle is backed up to a dock stall. The freight is unloaded and moved by forklift or cart to another dock stall where the freight is loaded into other trailers.4
Functionally, the docks at issue facilitate the movement of freight from inbound to outbound transportation vehicles. They provide a flat loading and unloading area under protective cover which is readily accessible to incoming and outgoing vehicles. The number of employees who work on the docks varies from a maximum of 80 full time employees per 8 hour shift at the St. Louis dock to a minimum of 5 part time employees per 8 hour shift at the Davenport dock. The average number of trucks loaded and unloaded per day at the docks varies from eleven at Sandusky and Tucson to three hundred at St. Louis.
Structurally, the docks are rectangular in appearance. The dimensions vary. The smallest in Waco, Texas is 40' x 40' x 17' 10 . The largest in St. Louis is 81' x 757' x 21' 2 . The dock platforms consist of a concrete slab, normally six inches thick, which is raised approximately four feet off the ground to a height suitable for access to truck beds. The slabs are generally supported by concrete perimeter foundation walls and dirt or other filling material.5 Each dock has a preengineered metal roof supported by eleven to twelve foot steel columns placed at twenty-two foot intervals along the length of the structure. Roof support crossbeams are placed over each laterally opposed pair of columns. Roof framing members, consisting of six inch deep steel purlins, run longitudinally on top of the crossbeams at five to six foot spacings. Roof sheetin