Pope & Talbot, Inc., & Subsidiaries, (1997)
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Pope & Talbot, Inc., & Subsidiaries, (1997)
T.C. Memo. 1997-116
UNITED STATES TAX COURT POPE & TALBOT, INC., & SUBSIDIARIES, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 530-93. Filed March 6, 1997.Grady M. Bolding, James E. Burns, Jr., Russell D. Uzes, Kevin P. Muck, and D. Cameron Baker, for petitioner.Milton J. Carter, Jr., Terri Merriam, Henry T. Schaefer, Christopher D. Hatfield, Randall E. Heath, and Robert F. Geraghty, for respondent.MEMORANDUM OPINION RUWE, Judge: Respondent determined deficiencies in petitioner's 1985 and 1986 Federal income taxes in the amounts of $17,693,960 and $954,678, respectively. In Pope & Talbot, Inc. &Subs. v. Commissioner, 104 T.C. 574 (1995), we denied petitioner's motion for partial summary judgment and granted respondent's motion for partial summary judgment, holding that under section 311(d),1 petitioner's gain on the distribution of appreciated property is to be determined as if petitioner sold the property in its entirety for fair market value and not by reference to the value of the property interest received by each shareholder.The primary issue for decision herein is the fair market value of the property distributed by petitioner. After concessions, the remaining issues for decision are: (1) Whether petitioner may offset fees in the amount of $1,364,071 in 1985, which were incurred in connection with the distribution, against its section 311(d) gain as costs of sale; (2) whether petitioner may deduct investment banking fees in the amounts of $89,788.08 and $66,195.92 in 1985 and 1986, respectively, for advice regarding potential hostile takeovers; and (3) whether petitioner may deduct $1,465 paid to Depository Trust Co. in 1985 in connection with holding petitioner's stock.Some of the facts have been stipulated and are so found. The stipulation of facts, first supplemental stipulation of facts, and stipulations of exhibits are incorporated herein by this reference. For purposes of convenience, our findings of fact with respect to respondent's specific determinations will be combined with our opinion on each issue.Background Petitioner is a publicly held Delaware corporation with its principal place of business in Portland, Oregon. Petitioner's shares are traded on the New York Stock Exchange. During 1985, petitioner engaged in several businesses, primarily in Oregon and Washington, including timber, sawmill and pulp mill operations, land development, and resort businesses.In October 1985, petitioner's board of directors adopted a Plan of Distribution (the plan). Under the terms of the plan, petitioner would transfer its timber and land development properties and related assets located in the State of Washington (collectively referred to as the "Washington properties") to Pope Resources, a newly formed Delaware limited partnership (the Partnership). Upon transfer of the Washington properties to the Partnership, the managing general partner was to make a pro rata distribution of the interests in the Partnership (partnership units or units), on the basis of one partnership unit for each five shares of common stock.Petitioner's board of directors believed the plan to be in the best interests of petitioner's shareholders for several reasons. First, the plan would provide certain tax benefits, including elimination of the double tax associated with the corporate form and the passing through of net losses to the unitholders. Next, the plan would substantially improve petit...See the full content of this document
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