Opinion ID: 1188758
Heading Depth: 1
Heading Rank: 8

Heading: Apportionment of Income Taxes

Text: The defendant's appraiser was of the opinion that only income taxes attributable to railway income should be considered as an expense under the income theory. He made an apportionment of the income tax attributable to nonoperating income and operating income. [13] The plaintiffs' appraisers, in preparing their calculations under the Income approach, determined net railroad operating income, after deducting for all federal income tax paid by the plaintiffs. All of the experts conceded that, in valuing the plaintiffs' properties, whether under the Cost, Stock and Debt or Income approach, the properties being valued should be limited to the operating properties owned by the plaintiffs, and that income from nonoperating properties and income from nonoperating companies owned by the plaintiffs should not be considered. In determining the value of the operating railroad properties, income taxes attributable to nonoperating activities should not be offset against operating income of the railroad operating properties. Although the plaintiffs, under ICC accounting rules for determining net railway operating income, may well have been permitted to deduct all income tax, we believe that it is proper to allocate, when calculating value under the income approach, only that federal income tax expense attributable to rail operations.