309 U.S. 13 (1990), 229, Real Estate-Land Title & Trust Co. v. United States

Docket Nº:No. 229
Citation:309 U.S. 13, 60 S.Ct. 371, 84 L.Ed. 542
Party Name:Real Estate-Land Title & Trust Co. v. United States
Case Date:January 15, 1940
Court:United States Supreme Court

Page 13

309 U.S. 13 (1990)

60 S.Ct. 371, 84 L.Ed. 542

Real Estate-Land Title & Trust Co.


United States

No. 229

United States Supreme Court

Jan. 15, 1940

Argued January 5, 1940




Under the Revenue Act of 1928, § 23(k), and Treasury Regulations 74, Art. 206, a deduction for obsolescence is not allowed for a plant which has not functionally depreciated, but which is a needless duplication acquired in a voluntary business consolidation, and which the management desires to eliminate, preferring another which is also adequate but which can be operated with fewer employees. Pp. 117.

102 F.2d 582 affirmed.

Certiorari, 308 U.S. 539, to review a judgment reversing a judgment recovered in the District Court in a suit for a refund of income taxes.

Page 14

DOUGLAS, J., lead opinion

MR. JUSTICE DOUGLAS delivered the opinion of the Court.

Petitioner, a Pennsylvania corporation, was formed in October, 1927, as a result of a statutory consolidation or merger of three companies. Two of the constituent companies owned title search plants which were among the assets acquired by petitioner as a result of the consolidation. While it was known that two title plants would be acquired on the consolidation, there was at that time no definite plan for their disposition. But an immediate investigation was made, and it was decided to store one of the plants in order to effect economics of operation. That was done substantially simultaneously with the consummation of the consolidation. About two months thereafter, it was decided [60 S.Ct. 372] that the plant retained in use was adequate, and that the one in storage would not be needed. Although, for a brief period, some slight use appears to have been made of the stored plant,1 it was not kept up to date by the addition of current recordings. As a result, it had only a salvage value by October 31, 1928. Meanwhile, negotiations for its sale had been unsuccessful.

In this action, petitioner seeks a refund of income taxes for the fiscal year ended October 31, 1928, based on the refusal of the Collector of Internal Revenue to allow a deduction for obsolescence of this plant. It had been carried on the books of the constituent company at $275,000 and was brought into the consolidation at $800,000. The District Court, however, found that its value on March 1, 1913, was $1,000,000; on October 31, 1928, $125,000, making an actual loss of $875,000, which that court allowed as a deduction for obsolescence for the taxable year 1928. It accordingly allowed a refund. That judgment was reversed by the Circuit...

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