Longino v. Comm'r of Internal Revenue (In re Estate of Longino)
| Decision Date | 17 July 1959 |
| Docket Number | 70618.,Docket Nos. 70617 |
| Citation | 32 T.C. 904 |
| Parties | ESTATE OF J. T. LONGINO, DECEASED, ROBERT HARVEY LONGINO AND JOHN THOMAS LONGINO, JR., FORMER EXECUTORS, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.R. H. LONGINO, MARGARET W. LONGINO (HUSBAND AND WIFE), PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
J. L. Roberson, Esq., for the petitioners.
George L. Hudspeth, Esq., for the respondent.
Held, amount realized in settlement of a claim for damages to a cotton crop caused by the use of an insecticide was taxable as ordinary income and the fact the settlement instrument was in form an assignment of the claim was immaterial.
The respondent determined deficiencies in the income tax of petitioners for the year 1952 in these consolidated proceedings in the following amounts:
+-------------------------+
¦Docket No. ¦Deficiency ¦
+------------+------------¦
¦70617 ¦$1,096.03 ¦
+------------+------------¦
¦70618 ¦2,063.52 ¦
+-------------------------+
The one issue to be decided is whether $18,740.54, received from the settlement of a claim for damages to cotton crops, is to be considered ordinary income or as long-term capital gain.
Some of the facts are stipulated and they are found accordingly. R. H. Longino and Margaret W. Longino are husband and wife. During the years 1951 and 1952 they were partners with J. T. Longino (R. H. Longino's father) in the operation of a cotton plantation near Lula, Mississippi.
In connection with the production of the cotton crop for 1951 the partnership purchased and used an insecticide called UNICO 25% DD7 Emulsion Concentrate. This was a product of United Cooperatives, Inc. of Alliance, Ohio, hereinafter called United, which did not sell directly to farmers but distributed its products through local agencies, sales companies, farmers' cooperatives, and brokerage companies. As a result of the usage of the insecticide considerable damage was done to the cotton crop being grown on the plantation in 1951. Subsequently, R. H. Longino, the managing partner, made claim for the partnership against United and others for damages caused to the said cotton crop by the use of the insecticide. The United States Fidelity & Guaranty Company of Baltimore, Maryland, was the insurance carrier for United, having issued it a products liability policy.
After considerable negotiations between all parties concerned the claim for damages was settled by R. H. Longino on March 18, 1952, for himself and the partnership executing an instrument, assigning the claim for damages to United, and receiving a check from United States Fidelity & Guaranty Company in the sum of $21,087.60. This included $237.60 refund for returned insecticide and $20,850 damages.
The partnership, in its return for 1952, reported the $20,850 damages as long-term capital gain from which was deducted $2,109.46 attorney fees, leaving a reported net long-term capital gain of $18,740.54. The three equal partners in turn reported their respective shares of this sum as long-term capital gain in their own tax returns (R. H. and Margaret filed joint return) filed with the district director of internal revenue at Jackson, Mississippi. J. T. Longino died March 6, 1955, and Robert H. Longino and John T. Longino, Jr., qualified as executors and were sole beneficiaries of his estate.
The deficiencies in controversy result from respondent's determination that the $18,740.54 received by the partnership in settlement of the claims for damage to...
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