Metro Leasing and Development Corporation, East Bay Chevrolet Company, a Corporation, (2002)
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Metro Leasing and Development Corporation, East Bay Chevrolet Company, a Corporation, (2002)
119 T.C. No. 2
UNITED STATES TAX COURT METRO LEASING AND DEVELOPMENT CORPORATION, EAST BAY CHEVROLET COMPANY, A CORPORATION, Petitioner v.COMMISSIONER OF INTERNAL REVENUE, Respondent* Docket Nos. 8054-99. Filed July 17, 2002.In an earlier opinion, we decided that P permitted its 1995 earnings to accumulate beyond the reasonable needs of its business. Secs. 531-537, I.R.C. There remains, however, a dispute concerning the computation of the accumulated earnings tax. P contends, alternatively, that R failed to reduce P's accumulated earnings tax base by the following amounts: (1) 'Deferred' tax attributable to installment sale proceeds to be received by P in tax years after 1995; (2) the amount of the income tax deficiency determined by respondent which remains contested by P and for which P has made payment after filing its petition; and (3) the difference between the amount of tax liability reported on P's return and the amount of tax that would have been due on P's net capital gain.*This Opinion supplements a previously released opinion: Metro Leasing & Dev. Corp., East Bay Chevrolet Co., A Corporation v. Commissioner, T.C. Memo. 2001-119.All three reductions proposed by P require our interpretation of sec. 535(b), I.R.C. Proposed reductions (1) and (2) involve the interpretation of sec. 535(b)(1), I.R.C., and sec. 1.535-2(a)(1), Income Tax Regs. Reduction (3) involves sec. 535(b)(6), I.R.C. Reductions (1) and (3) present questions of first impression. With respect to reduction (2), this Court's decision on the issue was reversed by the Court of Appeals for the Fifth Circuit in J.H. Rutter Rex Manufacturing Co. v. Commissioner, 853 F.2d 1275 (5th Cir. 1987), revg. on this point T.C. Memo. 1987-296. If we follow the holding of the Court of Appeals, P would be entitled to a reduction for the paid, but still contested, income tax deficiency. R urges this Court not to follow the holding of the Court of Appeals.Held: This Court will not follow the holding of Court of Appeals on this point in Rutter Rex. Held, further, sec. 535(b), I.R.C., and underlying regulations are interpreted, and R's computation of P's accumulated earnings tax liability is correct.William L. Raby, for petitioner. Kathryn K. Vetter, for respondent.SUPPLEMENTAL OPINION1GERBER, Judge: In an earlier opinion, we decided that petitioner permitted its 1995 earnings to accumulate beyond the reasonable needs of its business. See secs. 531-537;2 Met...See the full content of this document
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