Baton Rouge Supply Co. v. Comm'r of Internal Revenue
| Citation | 36 T.C. 1 |
| Decision Date | 10 April 1961 |
| Docket Number | Docket No. 71320. |
| Parties | BATON ROUGE SUPPLY COMPANY, INC., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | United States Tax Court |
OPINION TEXT STARTS HERE
Harvey H. Posner, Esq., and Fred Blanche, Esq., for the petitioner.
Jackson L. Bailey, Esq., for the respondent.
In 1955, all of the stock of Baton Rouge Supply Company, Inc., a loss corporation, was acquired by Barksdale and LeBlanc. Held, the acquisition was not made for the principal purpose of evading or avoiding Federal income tax.
Respondent determined a deficiency in petitioner's income tax for the fiscal year ending March 31, 1956, in the amount of $39,385.83. The issues for decision are as follows:
(1) Whether Ira Eugene Barksdale and William H. LeBlanc, Jr., acquired the capital stock of petitioner for the principal purpose of evading or avoiding Federal income tax by securing to themselves a deduction, credit, or other allowance which they would not otherwise have enjoyed; and
(2) Whether petitioner is entitled to a bad debt deduction of $1,200.72 for the fiscal year ended March 31, 1956.
Some of the facts have been stipulated and are hereby found as stipulated.
Baton Rouge Supply Company, Inc. (hereinafter referred to as petitioner), is a corporation organized under the laws of Louisiana in 1935. Petitioner filed a corporate income tax return for the fiscal year ended March 31, 1956, with the district director of internal revenue for the district of Louisiana.
Walter Pilcher, Sr. (hereinafter referred to as Pilcher), was the president of petitioner and was the owner of the land and building on which petitioner's business was conducted. The land and building were leased to petitioner.
Petitioner's place of business was adjacent to that of Capital Builders Supply Company, Inc. (hereinafter referred to as Capital Builders), a corporation organized under the laws of Louisiana in 1951. The stock of Capital Builders was owned equally by Ira Eugene Barksdale (hereinafter referred to as Barksdale) and his wife and William H. LeBlanc, Jr. (hereinafter referred to as LeBlanc), and his wife.
Barksdale and LeBlanc, in addition to their stock ownership in Capital Builders, each owned a 50 percent interest in the partnership of Barksdale & LeBlanc (hereinafter referred to as the partnership), Baton Rouge, Louisiana, organized in 1945, which is engaged in the construction business. Barkle, Inc. (hereinafter referred to as Barkle), is a corporation organized under the laws of Louisiana in 1951, and was equally and solely owned by Barksdale and LeBlanc. This corporation bought, held, rented, and leased real estate.
The accelerated growth and expansion of the business activities of Capital Builders (and its unincorporated predecessor) and the partnership, during the years 1950 to 1955 created urgent and recurring needs for more land, buildings, and storage facilities. Continuous efforts to satisfy these space requirements resulted in successive property acquisitions. On the dates indicated, Barksdale and LeBlanc, as coowners, or Barkle, made the following property acquisitions:
+-----------------------------------------------------------------------------+
¦Date of ¦ ¦
+-------------+---------------------------------------------------------------¦
¦acquisition ¦Property description ¦
+-------------+---------------------------------------------------------------¦
¦Mar. 21, 1950¦Ira Eugene Barksdale and William H. LeBlanc, Jr., acquired from¦
+-------------+---------------------------------------------------------------¦
¦ ¦Walter Pilcher (Sr.) 13 lots (Nos. 1, 2, 3, 4, 5, 16, 17, 18, ¦
¦ ¦19, ¦
+-------------+---------------------------------------------------------------¦
¦ ¦20, 21, 22, and 23) and a 40-foot strip (adjacent to lots 1, 2,¦
¦ ¦3, 4, ¦
+-------------+---------------------------------------------------------------¦
¦ ¦and 5) in square 16 of Smiley Heights (which these purchasers ¦
+-------------+---------------------------------------------------------------¦
¦ ¦in turn conveyed to Barkle, Inc., on October 27, 1951). ¦
+-------------+---------------------------------------------------------------¦
¦Dec. 6, 1950 ¦Ira Eugene Barksdale and William H. LaBlanc, Jr., acquired lots¦
+-------------+---------------------------------------------------------------¦
¦ ¦10 and 11 of square 17, Smiley Heights, from Mrs. Mary F. ¦
¦ ¦Wells. ¦
+-------------+---------------------------------------------------------------¦
¦Jan. 9, 1951 ¦Ira Eugene Barksdale and William H. LeBlanc, Jr., acquired lot ¦
¦ ¦12 ¦
+-------------+---------------------------------------------------------------¦
¦ ¦of square 17, Smiley Heights, from Joe Robinson, et al. ¦
+-------------+---------------------------------------------------------------¦
¦Dec. 1952 ¦Abandonment of portions of Augustus Street and Railroad Avenue.¦
+-------------+---------------------------------------------------------------¦
¦Apr. 21, 1954¦Barkle, Inc., acquired lot 13 of square 17, Smiley Heights, ¦
¦ ¦from ¦
+-------------+---------------------------------------------------------------¦
¦ ¦Nancy Hayes. ¦
+-------------+---------------------------------------------------------------¦
¦Jan. 14, 1955¦Barkle, Inc., acquired lot 14 of square 17, Smiley Heights, ¦
¦ ¦from ¦
+-------------+---------------------------------------------------------------¦
¦ ¦Joe Robinson, et ux. ¦
+-------------+---------------------------------------------------------------¦
¦Feb. 17, 1955¦Barkle, Inc., acquired lot 15 of square 17, Smiley Heights, ¦
¦ ¦from ¦
+-------------+---------------------------------------------------------------¦
¦ ¦Robert L. Hamilton. ¦
+-------------+---------------------------------------------------------------¦
¦Nov. 22, 1955¦Ira Eugene Barksdale and William H. LeBlanc, Jr., acquired from¦
+-------------+---------------------------------------------------------------¦
¦ ¦Walter Pilcher, Sr., 10 lots (Nos. 6, 7, 8, 9, 10, 11, 12, 13, ¦
¦ ¦14, and ¦
+-------------+---------------------------------------------------------------¦
¦ ¦15) and a 40-foot strip (adjacent to lots 6, 7, 8, 9, and 10) ¦
¦ ¦in ¦
+-------------+---------------------------------------------------------------¦
¦ ¦square 16 of Smiley Heights. ¦
+-----------------------------------------------------------------------------+
The seven respective properties were acquired during the period of March 21, 1950, through February 17, 1955, by Barksdale and LeBlanc and Barkle, were rented or leased, upon acquisition, to Capital Builders or the partnership, and necessary improvements were forthwith erected thereon, to serve the needs of these businesses.
The tract of land first acquired in this series of acquisitions consisted of 13 contiguous lots and a 40-foot strip. This tract was acquired by Barksdale and LeBlanc on March 21, 1950, from Pilcher who, until then, owned the entirety of square 16 of Smiley Heights; by this purchase, Barksdale and LeBlanc acquired approximately one-half of the area— the triangular shaped western portion— of square 16, and Pilcher retained the other one-half, that is, the eastern portion of said square. A large warehouse-office building and five accessory buildings (storage sheds) were erected and a railroad track was installed. However, within less than a year, additional space requirements developed, and, with the informal abandonment (subsequently formalized in December 1952) of the northernmost portion of Augustus Street, Barksdale and LeBlanc acquired, in December 1950 and January 1951, three contiguous lots in square 17, Smiley Heights, as an enlargement of the first acquired tract. On December 6, 1950, lots 10 and 11 of square 17, together with the accessory right of usage of the 40-foot strip lying between the north line of the lots and the south line of the right-of-way of Baton Rouge, Hammond and Eastern Railway were purchased from Mary F. Wells; and on January 9, 1951, lot 12 of square 17 was purchased from Joe Robinson and his coowners. On this aggregation of property lying on the west of and adjoining the first acquired tract, Barksdale and LeBlanc erected a lumber storage shed, a warehouse and a shed for lumber-cutting operations; the unimproved area provided open storage facilities and passageways.
In 1953, the necessity for additional space recurred, and again Barksdale and LeBlanc set out to purchase some of the individual lots adjoining or in the immediate area of the property occupied by Capital Builders and the partnership. Their own efforts in this direction were unproductive; the property owners refused to sell and, in at least one case, the title to the property appeared to be in doubt. Thereupon, Barksdale and LeBlanc enlisted the aid and assistance of Allen Andrews (hereinafter referred to as Andrews), a man who since 1942 had lived in the...
To continue reading
Request your trial
-
Clarksdale Rubber Co. v. Comm'r Ofinternal Revenue
...part of the buyer, and subsequent purchase, to a conclusion that the principal purpose of purchase was tax avoidance. See Baton Rouge Supply Co., 36 T.C. 1 (1961); Berland's Inc. of South Bend, 16 T.C. 182 (1951). Since the petitioner has established that other sound business reasons motiva......
-
Matter of Federated Dept. Stores, Inc.
...1964 WL 1179 (1975) (acquiring corporation permitted to deduct losses incurred by acquired loss corporation); Baton Rouge Supply Co. v. Comm'r, 36 T.C. 1, 13, 1961 WL 1103 (1961). The government argues, however, that § 382 permits only the loss corporation, TFDC, to continue to carry on the......
-
ESRENCO TRUCK CO., ET AL. v. Commissioner, Docket No. 84146
...not otherwise have enjoyed. Cf. Goodwyn Crockery Co. Dec. 25,146, 37 T. C. 355, on appeal (C. A. 6, March 29, 1962); Baton Rouge Supply Co. Dec. 24,775, 36 T. C. 1. If Associates is to sustain its burden of proof that it was not acquired for the principal purpose of tax avoidance, it must e......
-
Luke v. Commissioner, Docket No. 88890-88892
...are considered in planning an acquisition is not conclusive proof that the "principal purpose" was tax avoidance. Baton Rouge Supply Co. Dec. 24,775, 36 T. C. 1, 13 (1961); Berland's Inc. of South Bend Dec. 18,057, 16 T. C. 182, 188 (1951). However, while taxpayers may, if otherwise allowab......