Court Opinion

ID: 9449093
Source: CourtListenerOpinion
Date Created: 2023-08-03 23:56:20.547594+00
Date Added: 2024-06-11T17:31:41.722197
License: Public Domain

CHAMBERS, Chief Judge
(concurring and dissenting).
I concur in the last part, that is, the part of the opinion which rejects petitioner’s construction of 113(a) (8) of the Internal Revenue Code of 1939, where-under it asserts that Fleetlines and Truck Terminals could close the door on the commissioner by Fleetlines’ mere act of paying the capital gain tax: that thereby the issue was determined. Literally there is a lot to be said for the construction, but I do not believe the Congress intended to leave the gate that far ajar. Counsel for petitioner is to be complimented on his ingenuity.
But I have trouble upholding the recasting of the basic transaction to one of a simple exchange of Fleetlines’ trucks for capital stock of Truck Terminals. Normally I would think Commissioner of Internal Revenue v. Duberstein, 363 U.S. 278, 80 S.Ct. 1190, 4 L.Ed.2d 1218, would indicate affirmance here. But, I am troubled by a circumstance in the case, which is perhaps understandable tactics, on which neither of the parties has said very much.
In this case, in the tax court, the transaction of the “sale” of the trucks *458was attacked under Section 15(c) of the Internal Revenue Code of 1939, an excess profits section in effect in 1952. By its terms, an intent to avoid excess profits was expressly made the keystone of the section. The tax court found:
“Securing the surtax exemption and the minimum excess profits tax credit was not a major purpose in the activation of petitioner or the transfer of the 78 units of motor vehicular equipment to it by Fleetlines.
“The transfer of the 78 units of motor vehicular equipment by Fleet-lines to petitioner was not effected by a bona fide sale and purchase, but was made by Fleetlines solely in exchange for stock or securities in petitioner.”
Elsewhere in the opinion, the tax court says on the issue of capital gains for the two companies vis-a-vis a higher cost basis for Truck Terminals to depreciate: “Petitioner has shown numerous reasons for making the transfer, but no valid business reasons independent of tax considerations for the choice of a sale as the method of transfer.”
As I see it, as against Section 15(c) the tax court has impliedly said the taxpayer had valid business reasons for the transfer, but no business reasons other than saving ordinary taxes by an increased depreciation base. I have trouble with the notion that the taxpayers intended to avoid ordinary taxes but not .excess profits taxes. One vitiates the other. I take it that the decision on the excess profits taxes has become final, but I feel the tax court has sort of “arbitrated” the case.
I am not unmindful that many taxpayers intend to flout the income tax law and honorably succeed in observing it and are not taxed on their intent. In other cases innocent intentions result in horrendous taxes. But here the tax court seems, in a few offhand words, to recast the transaction for ordinary taxes on the basis of taxpayers’ “no valid business reasons independent of tax considerations.”
In which lobe of the corporate brain would we find the intent not to avoid excess profit taxes and in which lobe would we find the intent to get capital gains and avoid ordinary income taxes ? Anyway, I now better understand the meaning of “dichotomy.”
It may be said that petitioner has not properly asserted the point which I make. He has not specifically pointed to it, but his general attack may cover it.
If I had two votes instead of one, I would send the case back to the tax court with a query of: Are not the findings rather inconsistent ?