Corn Belt Hatcheries of Arkansas, Inc. v. Comm'r of Internal Revenue

Decision Date14 July 1969
Docket NumberDocket No. 108-68.
Citation52 T.C. 636
PartiesCORN BELT HATCHERIES OF ARKANSAS, INC., PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
CourtU.S. Tax Court

OPINION TEXT STARTS HERE

N. Barr Miller, for the petitioner.

Raymond L. Hampton, for the respondent.

Shortly after the enactment of the Revenue Act of 1962, petitioner filed its first consolidated return for its 1962 fiscal year. For its 1963 fiscal year, petitioner elected to file a separate return. Held, in view of the ambiguity in Rev. Rul. 62-204, petitioner's election to file a separate return was timely.

OPINION

TANNENWALD, Judge:

Respondent determined a deficiency in petitioner's income tax for the taxable year ending August 31, 1963, in the amount of $26,035. The sole issue for our determination is whether respondent properly computed petitioner's liability on the basis of a consolidated return with its subsidiary, Rocky Mound Farms, Inc., or whether petitioner was entitled to file a separate return.

The case was submitted under Rule 30 of the Rules of Practice of this Court. All of the facts are stipulated and are found accordingly.

Petitioner, an Arkansas corporation, maintained its principal office in Hope, Ark., at the time of filing the petition herein. Petitioner filed a separate Federal corporation income tax return for the period ending August 31, 1963, with the district director of internal revenue, Little Rock, Ark. Petitioner maintains its books and files its Federal income tax returns on the basis of a 52-53-week fiscal year ending on the Saturday nearest August 31. For its 1960 and 1961 fiscal years, petitioner filed separate Federal income tax returns as an unaffiliated corporation.

On September 30, 1961, petitioner acquired 99 percent of the outstanding stock of Rocky Mound Farms, Inc. (hereinafter Rocky Mound), an Arkansas corporation formed on June 14, 1961. Rocky Mound filed a separate Federal income tax return as an unaffiliated corporation for its first taxable period, June 14, 1961, through August 31, 1961, in order to place Rocky Mound on a taxable year coincident with that of petitioner.

Petitioner and Rocky Mound filed a consolidated Federal income tax return as an ‘affiliated group’ for their 1962 fiscal year, which ended September 1, 1962. This return, which was due November 15, 1962, was executed by petitioner on November 12, 1962, and was timely filed.

Petitioner and Rocky Mound filed separate Federal income tax returns for the taxable year ended August 31, 1963. No other corporation became a member of the affiliated group during the 1963 fiscal year, nor did petitioner make application to respondent for permission to file separate returns.

It is conceded that the Revenue Act of 1-62, Pub. L. 87-834, 76 Stat. 960, constituted a significant change in the revenue laws and that, therefore, taxpayers who had filed consolidated returns were entitled to a new election as to whether to continue this practice or to file separate returns. Sec. 1.1502-11(a), Income Tax Regs. The only question herein is whether petitioner qualified as such a taxpayer with respect to its taxable year ended August 31, 1963.

No specific provision of the Revenue Act of 1962 deals with the instant situation. Our sole legislative guidance is found in the committee reports,

which state: XXIII. NEW ELECTION TO FILE SEPARATE RETURNS WHERE CONSOLIDATED RETURNS HAD BEEN FILED

The Internal Revenue Code leaves to regulations issued by the Treasury Department requirements as to the filing of consolidated returns by an affiliated group and the requirements for changing from a consolidated return to separate returns. Generally it has been held that a consolidated return once filed must be continued in subsequent years unless there is a significant change in the tax laws. This is a matter which has been considered by your committee in connection with this bill and it believes that a new election to file separate returns where a consolidated return has previously been filed should be available for the first taxable year ending after the date of enactment of this bill. (S. Rept. No. 1881, 87th Cong., 2d Sess. (1962), 1962-3 C.B. 840; H. Rept. No. 1447, 87th Cong., 2d Sess. (1962), 1962-3 C.B. 500.)

The Revenue Act of 1962 became law on October 16, 1962, and the respondent released its initial administrative interpretation of the effect of the Act with respect to the filing of consolidated returns in T.I.R. 412 on November 9, 1962, which subsequently was published as Rev. Rul. 62-204, 1962-2 C.B. 212. This ruling stated in pertinent part:

Since the Revenue Act of 1962 constitutes a significant change in the tax laws, the Treasury Department has authorized a new election to file separate returns for either the first taxable year for which returns are due to be filed after the date of enactment of the Act, or the first taxable year ending after the date of such enactment.1

Six days following the announcement of this ruling, petitioner was required, in the absence of an extension, to file its 1962 return, which requirement was satisfied by petitioner in the form of a consolidated return with Rocky Mound. Thereafter, on January 3, 1963, T.I.R. 439, subsequently published as Rev. Rul. 63-18, 1963-1 C.B. 171, was issued, as respondent states, ‘in response to numerous inquiries regarding the application of Revenue Ruling 62-204 and in order to clarify the ruling.’ It provided as follows:

As stated in the headnote of Revenue Ruling 62-204, affiliated corporations filing consolidated returns may make a new election to file separate returns for either the first taxable year for which returns are due to be filed after the date of enactment of the Revenue Act of 1962, or for the first taxable year ending after the date of such enactment.

Revenue Ruling 62-204 applies only to affiliated corporations which filed a consolidated return for the first taxable year preceding the earliest taxable year for which a new election is available. It is emphasized that affiliated corporations which filed separate returns for the first taxable year preceding the earliest taxable year for which a new election is available may not elect, under Revenue Ruling 62-204, to file separate returns for the first taxable year ending after the date of enactment of the Revenue Act of 1962, after having elected to file a consolidated return for the first taxable year for which returns are due to be filed after the date of such enactment.

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12 cases
  • Krukowski v. Comm'r of Internal Revenue
    • United States
    • U.S. Tax Court
    • 22 de maio de 2000
    ...for the change. See also Gottesman & Co. v. Commissioner, 77 T.C. 1149, 1981 WL 11396 (1981), and Corn Belt Hatcheries of Arkansas, Inc. v. Commissioner, 52 T.C. 636, 1969 WL 1551 (1969) (discussed infra pp. 48–50), where we decided that taxpayers were entitled to rely on withdrawn or uncla......
  • Dover Corp. v. Comm'r of Internal Revenue
    • United States
    • U.S. Tax Court
    • 5 de maio de 2004
    ...liquidation of H & C is certainly a plausible interpretation of that regulation. As we stated in Corn Belt Hatcheries of Ark., Inc. v. Commissioner, 52 T.C. 636, 639, 1969 WL 1551 (1969), in sustaining the taxpayer's plausible interpretation of an ambiguous ruling, “[t]axpayers are already ......
  • Addison Int'l, Inc. v. Comm'r of Internal Revenue, Docket No. 6058-82.
    • United States
    • U.S. Tax Court
    • 21 de junho de 1988
    ...to interpret ambiguities in respondent's rulings to conform to his subsequent clarifications * * *.‘ Corn Belt Hatcheries of Arkansas, Inc. v. Commissioner, 52 T.C. 636, 639 (1969). 10 In Fritzsche Dodge & Olcott, Inc. v. Commissioner, 45 T.C.M. 607, 52 P-H Memo T.C. par 83,056 (1983), we f......
  • Dover Corporation and Subsidiaries v. Commissioner of Internal Revenue, No. 12821-00 (U.S.T.C. 5/5/2004)
    • United States
    • U.S. Tax Court
    • 5 de maio de 2004
    ...the deemed liquidation of H&C is certainly a plausible interpretation of that regulation. As we stated in Corn Belt Hatcheries of Ark., Inc. v. Commissioner, 52 T.C. 636, 639 (1969), in sustaining the taxpayer's plausible interpretation of an ambiguous ruling, "[t]axpayers are already burde......
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