Opinion ID: 1246676
Heading Depth: 1
Heading Rank: 1

Heading: Proceedings in the Trial Courts.

Text: (1) In 1972, Champion reported income from timber transactions as capital gains in the total amount of $29,046,941, of which only $122 represented gains from timber cut in Virginia. Champion allocated the capital gains according to situs, $122 to Virginia and the remainder elsewhere. After an audit, the Department of Taxation (the Department) made a deficiency assessment based upon its conclusion that the income from all timber transactions was apportionable rather than allocable and accordingly was subject to the application of the three-factor formula prescribed in .041 for the taxation of Virginia taxable income of the corporation. Champion paid under protest, and applied to the trial court (the Circuit Court of the City of Richmond, Division I) for correction of an erroneous assessment. The trial court, ruling that the timber transactions were capital gains, and were not apportionable to Virginia, ordered that $28,806.95, with interest, be refunded to Champion. The Department has appealed. (2) The Department, after auditing the tax returns of Weaver for 1972, 1973, and 1974, assessed deficiencies resulting from the taxpayer's treatment of interest income as allocable rather than apportionable. Weaver paid under protest, and applied to the trial court (the Circuit Court of Fairfax County) for correction of an erroneous assessment. The trial court, ruling that the income was apportionable, not allocable, and that the assessment was not erroneous, denied the taxpayer relief. Weaver has appealed the final order. (3) Merrill Lynch allocated the entire amount of its interest and dividend income to New York for 1972 and 1973. In 1977, the Department assessed deficiencies resulting from the taxpayer's treatment of interest and dividend income as allocable rather than apportionable. Merrill Lynch paid under protest, and applied to the trial court (the Circuit Court of the City of Richmond, Division I) for correction of an erroneous assessment. The trial court ruled in favor of Merrill Lynch, holding that the income was allocable. The Department filed a notice of appeal but later reconsidered and exercised its statutory right to a rehearing. The Department's motion to stay the proceedings pending the disposition of the appeal in Weaver was denied, and the rehearing, at which the Tax Commissioner testified, was conducted. Again, the trial court ruled in favor of the taxpayer and entered final judgment ordering that the stipulated amount of the refund, with interest, be paid to Merrill Lynch. The Department has appealed. Thus, opposite results were reached by the trial court in Weaver and the trial court in Merrill Lynch, although the dispositive legal question was the same in each case.