Court Opinion

ID: 4486114
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:34:11.81878+00
Date Added: 2024-06-11T15:02:45.389530
License: Public Domain

WHITAKER, J., dissenting: In this case, the majority concludes that petitioner shifts to respondent the burden of going forward with the evidence merely by proof that the lease of the airplane contained “a fixed and definite term of 2 years” and “did not contain an option to renew.” The majority also fails to give even lip service to the long-established theorem that “Transactions between a corporation and its controlling stockholders are subject to special scrutiny.” Ingle Coal Corp. v. Commissioner, 174 F.2d 569, 571 (7th Cir. 1949). This case is but another illustration of the difficulty we frequently have with fully stipulated cases. One may argue that respondent had the opportunity to expand the stipulation to show actual use of the plane during the second lease term, i.e., to show abuse if that existed. However, it is up to the petitioner to show error in the statutory notice. That was not done here. The petitioner husband was for practicable purposes the sole shareholder in both corporations. The stipulated facts show that the first corporation had a business need for the airplane. There is no stipulated fact to indicate that such business need changed in any respect when 16 months later the lessor terminated that lease and switched the plane to the second wholly owned corporation.1 Whether the second lessee had any business need for a plane does not appear. It is thus reasonable to infer from the stipulated facts that the business need of the first lessee continued and was supplied by the second lessee. At least that inference should be rebutted before the burden of going forward is shifted to respondent. Otherwise “special scrutiny” is not given to the transactions. While it is possible that the majority’s rule of shifting the burden of going forward on showing of a 2-year lease term and no option might be appropriate where the lessor and lessee are unrelated, it is not, in my judgment, appropriate in a case such as this.2  For the forgoing reasons, I would hold that the petitioners have failed to carry their burden of proof in this case. Parker, Clapp, Gerber, and Williams, JJ., agree with this dissent.   The majority states “the record establishes that, rather than selling the airplane when the corporation no longer needed it, petitioner agreed to a termination of the 1981 lease before it expired.” (Emphasis supplied.) It is not clear whether use of the clause “when the corporation no longer needed it” is simply a reference to facts which have been deemed important in other cases or whether it is a fact in this case. If the latter, it is not supported by the record.    The majority seems to feel that the business purposes of the first corporate lessee somehow legitimate the transaction for petitioner. The opposite is in fact the case. The lessee’s business purposes are immaterial from the standpoint of justifying the lessor’s actions; they simply create an inference that the business need continued, an inference which should have been rebutted by petitioner in order to carry his burden of proof.