Bloomington Coca-cola B. Co. v. Commissioner of Int. Rev., 10339.
| Citation | 189 F.2d 14 |
| Decision Date | 28 May 1951 |
| Docket Number | No. 10339.,10339. |
| Parties | BLOOMINGTON COCA-COLA BOTTLING CO. v. COMMISSIONER OF INTERNAL REVENUE. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Ralph H. Schuette, Schuette & Taylor, Paducah, Ky., for petitioner.
Theron Lamar Caudle, Asst. Atty. Gen., Ellis N. Slack, Robert N. Anderson, Richard D. Harrison, L. W. Post, Sp. Assts. to the Atty. Gen., for respondent.
Before KERNER, LINDLEY, and SWAIM, Circuit Judges.
The question presented by this petition for review is whether the Tax Court correctly upheld the Commissioner's determination that in 1939 the taxpayer sustained a loss upon the sale of real estate which did not come within the scope of § 112(b)(1) of the Internal Revenue Code, 26 U.S.C.A. § 112(b), but was recognizable under § 112(a) thereof for the purpose of computing its excess profits tax credit based on an average base period net income.
The Tax Court held that the transaction was not an exchange protected from tax impact by § 112(b)(1) but was a sale which resulted in a recognizable loss. In this court taxpayer claims "no error with respect to the findings of facts of the Tax Court, but alleges that the Tax Court erred in applying the law to those facts." It makes the point that the payment of $64,500 cash in addition to the transfer of an old bottling plant as consideration for the construction of a new plant did not remove the transaction from the purview of § 112 (b)(1) of the Revenue Act of 1938.
The material facts are that in 1930 taxpayer, at a cost of $36,000, acquired a bottling plant in Bloomington, Illinois — allocating $30,500 to buildings and $5,500 to land. In 1938, concluding that the plant was inadequate for its needs, taxpayer decided to build a new plant. It decided it had no use for the old plant and wished to dispose of it. With those purposes in mind, it entered into a contract with a contractor to construct a new plant. The new plant was completed in 1939. By the contract the contractor furnished the necessary material and labor, and completed the building in accordance with the plans and specifications prepared by its architect for a total of $72,500. Of this sum the contractor was paid $64,500 in cash and accepted taxpayer's old buildings and the land upon which the old plant was located at a valuation of $8,000, and the old building and land were transferred to the contractor.
Taxpayer, in its 1939 income tax return, reported the transaction thusly:
Lot, Cost July 1930 $ 5500.00
Sold April 30, 1939 1424.55
_________
Loss 4075.45
Limitation (2000.00)
Building, Cost July 1930 30,500.00
Depreciation on building to April
30, 1939 5,113.21
__________
Net book value April 30, 1939 25,386.79
Sold April 30, 1939 6,575.45
__________
Loss $18,811.34
Schedule B of taxpayer's 1943 and 1944 excess profits tax return shows the 1939 base period excess profits net income as follows:
1. Normal Tax (or special
class) net income $ 2,278.25
2. Net capital loss used in
computing line 1 2,000.00
* * * * * *
4. Net loss from sale or exchange
of property other
than capital assets deducted
in computing line 1 (for
taxable years begining after
December 31, 1937) $18,811.34
* * * * * *
31. Excess profits net inco $23,089.59
The Commissioner in determining the excess profits taxes for the years 1943 and 1944 adjusted the average base period net income for the year 1939 as computed by the taxpayer by deducting the amount of $22,886.79 as a loss not coming within the scope of § 112(b)(1) of the Internal Revenue Code. This resulted in a deficiency of $8,049.19 in 1943 and $8,492.13 in 1944. The taxpayer contested this determination. The Tax Court, finding the facts in detail, sustained the Commissioner.
The Commissioner's determination and its approval by the Tax Court that taxpayer's disposition of the old plant constituted a sale and not an exchange of property for like property must be considered as prima facie correct, and the burden of proving it wrong is upon the taxpayer. We may not reverse the decision unless we can say the decision is clearly erroneous.
It is elementary that the language of a revenue act is to be read in the light of the practical matters with which it deals and is to be given its ordinary significance in arriving at the meaning of the statute. Old Colony R. Co. v. Commissioner, 284 U.S. 552, 52 S.Ct. 211, 76 L.Ed. 484.
The applicable statute, 26 U.S.C.A. § 112, provides:
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