Court Opinion

ID: 4482486
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:15:30.872017+00
Date Added: 2024-06-11T15:03:44.749934
License: Public Domain

Wiles, /., dissenting: I respectfully dissent from the majority opinion in this case. This Court has repeatedly held that section 1033 is a relief measure designed to prevent inequitable incidences of taxation and, therefore, should be construed liberally to effectuate its purposes. Gaynor News Co., 22 T.C. 1172, 1177 (1954); John Richard Corp., 46 T.C. 41, 44 (1966); William B. Cusack, 48 T.C. 156, 163 (1967). I believe that the majority opinion unrealistically portrays the substance of the transaction in issue. It is submitted that the following description of the transaction would be more accurate. In December 1966, the State notified petitioner that it was going to condemn petitioner’s business property located at 3825 City Terrace. The machinery located thereon was by State law part of the real property that was required to be condemned and, therefore, proper payment would have to be given to petitioner for the same. At this point, petitioner was willing to accept payment for all of its condemned property including the machinery. The State, however, desired to condemn petitioner’s property in the least expensive manner. Because it would lose money on resale of the machinery, the State determined that petitioner’s property was worth more to it without the machinery. The State, therefore, bargained to pay petitioner less than the value of all of the property provided that the petitioner retained the bulk of its machinery. I believe that the State paid petitioner a premium for the property purchased because of the savings that the overall arrangement provided it. Through an arm’s-length negotiation the parties bargained for and agreed to a price for the property purchased. Although this price certainly was affected by .overall considerations, it nevertheless reflected a price that the State was willing to pay for the property it purchased. In short, there was a purchase and sale of designated property at a designated price and that price when received was for income tax purposes the amount realized for the property sold. Lapham v. United States, 178 F. 2d 994 (C.A. 2, 1950). Petitioner reinvested the entire amount of the sales proceeds in similar property. Taking this view of the instant transaction, I believe petitioner has fulfilled the requirements of section 1033 and is entitled to defer recognition of gain. I believe this application of section 1033 is consistent with the declaration of the Ninth Circuit, to which appeal lies in this case, that its purpose is “to aid the taxpayer where he in good faith quickly transforms everything he received from the act of condemnation into property ‘similar or related in * * * use.’ ” Commissioner v. Babcock, 259 F. 2d 689, 692 (C.A. 9,1958). Forrester, Drennen, Fat, and Gorfe, //., agree with this dissent.