Document: 364 U.S. 130 80 S.Ct. 1497 4 L.Ed.2d 1617 COMMISSIONER OF INTERNAL REVENUE, Petitioner,v.GILLETTE MOTOR TRANSPORT, INC. No. 359. Argued April 21, 1960. Decided June 27, Mr. Wayne G. Barnett, Washington, D.C., for petitioner. Joseph A. Maun, St. Paul, Minn., respondent. Justice HARLAN delivered the opinion of Court. 1 The question in this case is whether a sum received by respondent from United States as compensation temporary taking Government its business facilities during World War II represented ordinary income or capital gain. issue involves construction and application s 117(j) Internal Revenue Code 1939, 26 U.S.C.A. § 117(j). 2 In 1944, was common carrier commodities motor vehicle. On August 4, respondent's drivers struck, it completely ceased to operate. Shortly thereafter, because need transportation war materiel, President ordered Director Office Defense Transportation 'take possession assume control of' them. assumed 12, appointed Federal Manager, who resume normal operations. Manager also announced his intention leave title properties interfere little possible management Subject certain orders given time time, resumed operations continued so function until termination all on 16, 1945. 3 Pursuant an Act Congress creating Motor Carrier Claims Commission, 62 Stat. 1222, 49 305 note, presented claim just compensation. contended that there had been no 'taking' property but only regulation it. however, determined assuming actual facilities, deprived valuable right determine freely what use be made ascertaining fair market value right, Commission found one which could have put rent them out, therefore their rental measure pecuniary loss. noted other cases takings, has typically held taken would arrived at willing lessor lessee. Accordingly, awarded, 1952, $122,926.21, representing 1945, plus $34,917.78, interest former sum, total $157,843.99. asserted award 1952. Respondent constituted amount upon 'involuntary conversion' used trade taxable long-term gain pursuant 1939.* Tax Court, adopting Midwest Express, Inc., 27 T.C. 167, affirmed 8 Cir., 251 F.2d 405, involved substantially identical facts, income. Court Appeals, judge dissenting, instance reversed. 265 648. We granted certiorari conflict between decisions two Circuits. 361 881, 151, 118. 5 stresses rejecting Government's contention regulation, rather than taking, occurred, property, awarded therefor. That indeed true. But fact something compensable under Fifth Amendment does not answer entirely different thing comes within capital-gains provisions Code. Rather, necessary precise nature taken. Here of, obligated pay for, make facilities. adopted reflected right. Given these we turn statute. 6 Section 117(j), claims, integral part statute's comprehensive treatment gains losses. Long-established principles govern more favorable tax rates gains: (1) There must first, 'capital asset,' second, 'sale exchange' asset (§ 117(a)); (2) asset' defined 'property taxpayer,' with exceptions here relevant 117(a)(1)); (3) purposes calculating gain, cost basis 113(b), 113(b)) subtracted realized sale exchange 111(a), 111(a)). 7 added 1942, effects change asset. It accomplishes main objectives. First, extends real depreciable personal business, type case. Second, accords such involuntary conversions both assets, strictly defined, business. Since net effect first merely remove exclusions definition assets 117(a)(1), seems evident business,' eligible treatment, satisfy same general criteria assets. second apparently required narrow term exchange.' See Helvering v. William Flaccus Oak Leather Co., 313 247, 61 878, 85 L.Ed. 1310. similarly basic notion constitutes While 117(a)(1) everything can called sense outside statutory qualifies This long construed narrowly accordance purpose afford situations involving realization appreciation accrued over substantial period thus ameliorate hardship taxation entire year. Burnet Harmel, 287 103, 106, 53 74, 75, 77 199. Thus unexpired lease, Hort Commissioner, 28, 757, 1168, corn futures, Corn Products Refining Co. 350 46, 76 20, 100 29 oil payment rights, Commissioner P. Lake, 356 260, 78 691, 743, are even though they concededly 'property' interests sense. And see Surrey, Definitional Problems Capital Gains Taxation, 69 Harv.L.Rev. 985, 987—989 Note 7. 9 present case, requirements Amendment. However, meaning §§ To sure, were themselves embraceable Had fee those damaged physically beyond wear tear incident use, resulting doubt treated conversion See, e.g., Waggoner, 15 496; Henshaw, 23 176. took put. 10 any investment, separate apart investment physical themselves. suggests method assigned right; yet necessary, determining 117, deduct sold, exchanged, involuntarily converted received. 111(a). Further, manifestly gives rise year advance built up several years, sought provisions. cited, page 134, 1500. short, asset, simply underlying recompense commonly regarded rent. precisely situation here, transaction 11 lays stress terms 'seizure' 'requisition' More specifically, section refers (as result destruction whole part, theft seizure, exercise power requisition condemnation threat imminence thereof) * *.' (Emphasis added.) action perhaps most typical example seizure requisition, that, therefore, intended treat transaction. argument, overlooks 'of (or) assets.' already shown long-standing come words thereby effect, since equally cover instances takes damages otherwise impairs property. 12 conclude paid A fortiori, Kieselbach 317 399, 63 303, 87 358. 13 Reversed. 14 DOUGLAS dissents. provides follows: 'Gains losses '(1) Definition For subsection, business' means character subject allowance depreciation provided 23(l), months, (A) kind properly includible inventory taxpayer if hand close year, (B) primarily customers course *. '(2) General rule. If, recognized sales exchanges compulsory months into money, exceed sales, exchanges, conversions, shall considered months. *'

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