Court Opinion

ID: 4492116
Source: CourtListenerOpinion
Date Created: 2020-01-17 22:03:14.063214+00
Date Added: 2024-06-11T15:03:57.409381
License: Public Domain

Smith,
dissenting: I dissent from so much of the report as holds that - the leasehold and building agreement at the time it was acquired by the petitioner had a fair market value of $1,000,000 and that petitioner is entitled to include said leasehold and building agreement in its invested capital at $1,000,000 and to compute the annual allowance for the exhaustion of the leasehold on that basis.
Much the same question as is here involved was before the Board in Kleeson Co., 6 B. T. A. 1153, affirmed in Kleeson Co. v. Blair, 28 Fed. (2d) 557. The Board held in that case that the value of the contract paid in to the corporation was not includable in invested capital.
In La Belle Iron Works v. United States, 256 U. S. 377, the court stated:
It is clear enough that Congress adopted the basis of “ invested capital ” measured according to actual contributions made for stock or shares and actual accessions in the way of surplus, valuing them according to actual and bona fide transactions and by valuations obtaining at the time of acquisition, not only in order to confine the capital, the income from which was to be in part exempted from the burden of this special tax, to something approximately representative of the risks accepted by the investors in embarking their means in the enterprise, but also in order to adopt tests that would enable returns to be more easily checked by examination of records, and make them less liable to inflation than if a more liberal meaning of “ capital and surplus ” had been adopted. * * *
In Kleeson Co. v. Blair, supra, the Circuit Court of Appeals for the Fourth Circuit said:
* * * Actual cash value can have no other meaning than the amount of the proceeds of the property when reduced to cash in a bona fide transaction.
In the instant proceeding it appears that the New York State Realty & Terminal Company gave an option to Bowman of a leasehold and building agreement and provided that the same might be assigned to a corporation which would be satisfactory to the New York State Realty & Terminal Company. Bowman assigned the option to the petitioner. He simply acted as agent of the petitioner in negotiating the lease. The report of the Board is to the effect *1216that the leasehold had an actual cash value of $1,000,000. There is nothing to indicate, however, that either Bowman or the petitioner could have sold the option for $1,000,000 cash. It was not an asset that could be sold. Not one dollar was invested by either Bowman or the petitioner for the option. In my opinion any value which might attach to the leasehold is not includable in the invested capital of the petitioner.
Murdock,
dissenting: I do not agree with the decision of the jurisdictional question which is involved in these proceedings. The Board has such jurisdiction in cases like these as has been conferred upon it by section 274 of the Revenue Act of 1926, and no more. The pertinent provisions of that section are as follows:
If in the case of any taxpayer, the Commissioner determines that there is a deficiency in respect of the tax imposed by this title, the Commissioner is authorized to send notice of such deficiency to the taxpayer by registered mail. Within 60 days after such notice is mailed ⅞ * * the taxpayer may file a petition with the Board of Tax Appeals for a redetermination of the deficiency.
Notices of deficiencies were mailed to the Bowman Hotel Corporation. The Bowman-Biltmore Hotels Corporation filed the petitions. These were two different corporations under the laws of New York as interpreted by the courts of that State. The first was the taxpayer. The latter was not. Thus we have no jurisdiction. It matters not, so far as our jurisdiction is concerned, that under the laws of the State of New York the latter corporation is the universal successor to the former, is liable for the taxes in question, and alone can sue or be sued on behalf of the former corporation. The fact remains that it is not the former corporation. The provisions of the statute are clear and permit no enlargement through interpretation. Before we have jurisdiction in cases like these Congress must use different words. The present decision is a departure from the strict rule previously adhered to by this Board and it is certainly contrary to the following decisions: Gideon-Anderson Lumber & Mercantile Co., 18 B. T. A. 329; Pittsburgh and West Virginia Railway Co., 22 B. T. A. 876; Grange National Bank, 22 B. T. A. 1209. Cf. Carnation Milk Products Co., 20 B. T. A. 627; Standard Silica Co., 22 B. T. A. 97; Pittsburgh Terminal Coal Corporation, 28 B. T. A. 248. The liability of the Bowman-Biltmore Hotels Corporation as a transferee is not before us.
I think that the statute relating to net losses was correctly interpreted in a line of cases beginning with Alabama By-Products Corporation, 18 B. T. A. 919. See also Buckie Printers Ink Co., 19 B. T. A. 943; Pittsburgh Gasoline Co., 21 B. T. A. 297, appeal dismissed by the Third Circuit on the Commissioner’s motion; Warren-Nash Motor Corporation, 21 B. T. A. 897; General Box Corporation, 22 B. T. A. 725; Arrow Coal & Ice Co. et al., 22 B. T. A. 1341; and *1217National Slag Co. v. Commissioner, 47 Fed. (2d) 846, reversing 16 B. T. A. 1310.
MoRRis, Lansdon, McMahon, and Goodrich agree with, this dissent.