Court Opinion

ID: 9638805
Source: CourtListenerOpinion
Date Created: 2023-08-22 15:54:51.574044+00
Date Added: 2024-06-11T18:10:09.882864
License: Public Domain

FRANK, Circuit Judge
(dissenting in part).
I agree that it is irrelevant that the business was once owned by a partnership. For when the sale to the Corning Company occurred, the partnership was dead, had become merely a memory, a ghost. To say that the sale was of the partnership’s assets would, then, be to indulge in animism.
But I do not agree that we should ignore what the parties to the sale, Williams and the Corning Company, actually did. They did not arrange for a transfer to the buyer, as if in separate bundles, of the several ingredients of the business. They contracted for the sale of the entire business as a going concern. Here is what they said in their agreement: “The party of the first part agrees to sell and the party of the second part agrees to buy, all of the right, title and interest of the said party of the first part in and to the hardware business now being conducted by the said party of the first part, including cash on hand and on deposit in the First National Bank & Trust Company of Corning in the A. F. Williams Hardware Store account, in accounts receivable, bills receivable, notes receivable, merchandise and fixtures, including two G. M. trucks, good will and all other assets of every kind and description used in and about said business.1 * * * Said party of the first part agrees not to engage in the hardware business within a radius of twenty-five miles from the City of Corning, New York, for a period of ten years from the 1st day of October 1940.”
To carve up this transaction into distinct sales — of cash, receivables, fixtures, trucks, merchandise, and good will — is to do violence to the realities. I do not think Congress intended any such artificial result. In the Senate Committee Report on the 1942 amendment to § 117, it was said: “It is believed that this Senate amendment will be of material benefit to businesses which, due to depressed conditions, have been compelled to dispose of their plant or equipment at a loss. The bill defines property used in a trade or business as property used in the trade or business of a character which is subject to the allowance for depreciation, and real property held for more than six months which is not properly includible in the inventory of the taxpayer if on hand at the close of the taxable year or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business. If a newspaper purchased the plant and equipment of a rival newspaper and later sold such plant and equipment at a loss, such plant and equipment, being subject to depreciation, would constitute property used in the trade or business within the meaning of this section.” These remarks show that what Congress contemplated was not the sale of a going business but of its dismembered parts. Where a business is sold as a unit, the whole is greater than its parts. Businessmen so recognize; so, too, I think, did Congress. Interpretation of our complicated tax statutes is seldom aided by saying that taxation is an eminently practical matter (or the like). But this is one instance where, it seems to me, the practical aspects of the matter should guide our guess as to what Congress meant. I believe Congress had those aspects in mind and was not thinking of the nice distinctions between Roman and Anglo-American legal theories about legal entities.

 Emphasis added.