Court Opinion

ID: 4487341
Source: CourtListenerOpinion
Date Created: 2020-01-17 22:00:42.748989+00
Date Added: 2024-06-11T14:54:07.978595
License: Public Domain

*486OPINION.
Graupner:
The taxpayer brings its appeal to this Board on the following allegations of error by the Commissioner:
1. In not allowing accelerated depreciation on plant and equipment during the period January 1, 1918, to June 30, 1919.
2. In holding that seventy per cent (70%) of the income of the taxpayer in the year 1919 was derived from a Government contract and taxable at the rate prescribed by the Revenue Act of 1918.
At the hearing counsel for the taxpayer agreed to waive its claim to accelerated depreciation. This leaves but one question for the Board to decide, namely, whether the amount received from the Emergency Fleet Corporation in payment for the two vessels constructed in pursuance of the requisition issued in August, 1917, constituted income from a Government contract within the meaning of section 301 (c) of the Revenue Act of 1918. This section provides in part:
For the taxable years 1919 * * * there shall he levied, collected, and paid upon the net income of every corporation which derives in such year a net income of more than $10,000 from any Government contract or contracts made between April 0, 1917, and November 11, 1918, * * * a tax equal to * * * (1) Such a portion of a tax computed at the rates specified in subdivision (a) as the part of the net income attributable to such Government contract or contracts bears to the entire net income.
Section 1 of Title I of the 1918 act provides that:
The term “ Government contract ” means (a) a contract made with the United States, or with any department, bureau, officer, commission, board, or agency, under the United States and acting in its behalf, or with any agency controlled by any of the above if the contract is for the benefit of the United States * * *.
Clearly the United States Shipping Board Emergency Fleet Corporation was such an agency of the United States as is contemplated *487by the language of the Revenue Act of 1918. No question on this point has been raised and we have only to determine whether the act of constructing the ships under the Fleet Corporation’s requisition was a construction under contract.
It was argued by counsel that the construction of the ships under the Fleet Corporation’s requisition was mandatory; there was no meeting of the minds; the fundamental principle of mutuality in contracts was entirely missing; and hence there was no contract between the taxpayer and the Fleet Corporation. While it can not be doubted that the requisition was mandatory, we can not overlook the fact that compensation was offered and the act of the taxpayer in completing construction pursuant to the requisition and subsequent orders for changes and extras must be construed at least as an implied acceptance of the terms of a contract.
The case of Brooks-Scanlon Corporation v. United States, 265 U. S. 106, while presenting a different question, involved similar facts. In that case the court held that, under the requisition issued, the Fleet Corporation put itself in the shoes of the owner of the contract with the shipbuilding company and took from the owner and appropriated to the use of the United States all the rights and advantages that an assignee of the contract would have had.
We must therefore hold that construction of the ships under the requisition of the Fleet Corporation amounted to a Government contract within the meaning of the Revenue Act of 1918 and that the deficiency was properly determined.