Court Opinion

ID: 9460344
Source: CourtListenerOpinion
Date Created: 2023-08-04 21:47:45.937076+00
Date Added: 2024-06-11T17:36:34.859022
License: Public Domain

GEE, Circuit Judge
(dissenting):
I respectfully dissent from the Court’s holding that taxpayer’s excise tax should be calculated upon a constructive price set by the Internal Revenue Service. Section 4216 of the IRC does not authorize this, even where the transaction is not at arm’s length, unless the “. article is . sold ... at less than the fair market price.” The court below found as a fact that “. . . the price charged by Creme Manufacturing was a fair market price charged in a similar fashion as that charged by others in the ordinary course of trade.”1
Record evidence, some of which is mentioned in the majority opinion, supports this finding. The majority disregards it on the basis of Bourjois, Inc. v. McGowan, 85 F.2d 510 (2d Cir. 1936), and other cases cited.
An examination of each of these cases shows that the item which gave the article or preparation there involved — otherwise a mere assembly of commonly-available materials into a generic product — its distinctive value, the trade name, was controlled by the manufacturing corporation. Thus, in those eases the real economic power in the picture, the power to discharge the sales organization and have the trademarked product sold by another, remained with the parent manufacturing corporation, and the sales corporation bought the finished product, including the affixed name, from the manufacturer. The item was thus unique and could be bought for resale from no one else. The courts in those cases were correct in refusing to consider its “fair market price” as determinable by reference to other articles or preparations which were not and could not be purchased elsewhere with the valuable trade name affixed.
*523the Our case is the reverse. Here sales corporation retained control of the trade name Creme Lure. The evidence pointed not towards the importance of the manufacturer’s technique but towards the distinctive, inherent value of the name Creme Lure. Creme Lure did not limit its sales to plastic worms. During the period in question, Creme Lure bought other types of fishing tackle from unaffiliated manufacturers, pre-packaged and with the Creme Lure label affixed.
The advertising, which misleadingly stated that Creme Lures were manufactured by Creme Lure Company, did not conclusively show that because Creme Manufacturing Company produced the product it was inherently more valuable. Indeed, the misleading portion of the statement substantiates the conclusion that the value was in the name.
The power to authorize affixing of the trade name was in Creme Lure, and with it the power to fire Creme Manufacturing and have the article made, with the name affixed, by another. When Creme Lure bought each finished article from Creme Manufacturing, it did not buy the affixed trade name on it; it already owned that and could have bought similar articles, with the name affixed on them by its prior authorization, from at least four other manufacturers noted in the record.
Thus, I conclude that the district court properly measured the fair market value of the manufactured product by the price for which an independent private brand manufacturer would be willing to make the product for the sales corporation, rather than by an objective manifestation of the price others would pay for the worms.
Bourjois and its siblings seem to me to stand for some such principle as that the fair market price of Beluga caviar may not properly be determined by reference to the going price for caviar in general; my understanding of the Court’s holding is that the fair market price of caviar in general may not be determined in that way either.

. Creme Manufacturing Co. v. United States, 348 F.Supp. 270 (E.D.Tex.1972).