Commissioner of Internal Rev. v. Lincoln-Boyle Ice Co.

• Decision Date: 01 December 1937
• Docket Number: 6156.,No. 6155,6155
• Citation: 93 F.2d 26
• Parties: COMMISSIONER OF INTERNAL REVENUE v. LINCOLN-BOYLE ICE CO. LINCOLN-BOYLE ICE CO. v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Seventh Circuit

93 F.2d 26 (1937)

COMMISSIONER OF INTERNAL REVENUE v. LINCOLN-BOYLE ICE CO.

LINCOLN-BOYLE ICE CO. v. COMMISSIONER OF INTERNAL REVENUE.

Nos. 6155, 6156.

Circuit Court of Appeals, Seventh Circuit.

December 1, 1937.

James W. Morris, Asst. Atty. Gen., and Sewall Key and F. E. Youngman, Sp. Assts. to Atty. Gen., for Commissioner of Internal Revenue.

A. J. Pflaum, Harry N. Wyatt, and W. R. Arrington, all of Chicago, Ill., for Lincoln-Boyle Ice Co.

Before EVANS and SPARKS, Circuit Judges, and LINDLEY, District Judge.

LINDLEY, District Judge.

In No. 6155, the Commissioner of Internal Revenue petitions to review one decision of the United States Board of Tax Appeals, and in No. 6156 the taxpayer, Lincoln-Boyle Ice Company, another. Both causes involve on the merits, the question of the proper basis for the computation of depreciation of assets of the taxpayer in the taxable years 1927 and 1928. The question is the same for each year.

The taxpayer was organized in 1926 for the purpose of taking over four predecessor companies; Lincoln Ice Company, Boyle Ice Company, Ravenswood Ice Company, and Irving Park Ice Company. The new company, on January 1, 1927, acquired all assets of each of the four corporations, except their cash, marketable securities and accounts and bills receivable, giving to the stockholders of the transferors in exchange, all of the preferred and common stock and $2,000,000 first mortgage bonds of the taxpayer, less $350,000 of the latter securities retained and used to discharge the then existing funded debt of the Boyle Ice Company.

The properties conveyed were appraised and taken over by the taxpayer at the appraised value. The Lincoln Ice Company conveyed 46.77 per cent. of the total assets acquired by the taxpayer and its stockholders received in return 54.59 per cent. of all securities delivered by the taxpayer in payment of the assets. The Boyle Ice Company conveyed 26.74 per cent. of the assets and its stockholders received 17.31 per cent. of the securities; the Ravenswood Ice Company 9.11 per cent. of the assets and 14.19 per cent. of the securities; the Irving Park Ice Company 17.36 per cent. of the assets and 13.89 per cent. of the securities. This resulted in an overpayment or profit to the Lincoln Company of 16.71 per cent., or $274,258.94; in an underpayment or loss to the Boyle Company of 35.23 per cent. or $330,495.81; an overpayment to the Ravenswood Ice Company of 55.71 per cent., or a profit of $178,116.16; an underpayment to the Irving Park Ice Company of 20.00 per cent. or a loss of $121,879.29.¹ The stockholders of the four predecessor corporations were not identical with the stockholders of the taxpayer.

In making its income tax report for each of the years 1927 and 1928, in computing depreciation upon its assets, the taxpayer used as a basis the cost of the properties to it at the appraisement figures made at the time the properties were acquired. The Commissioner approved this procedure for the year 1927, but in 1928 concluded that, despite the discrepancy in the respective interests received by the various transferring companies as compared with the value of the assets conveyed by them, the transaction amounted to a reorganization, and that the proper basis for computation of depreciation was the original cost of the properties to the respective transferors. Upon review the Board of Tax Appeals held, over the Commissioner's objection in an answer seeking to extend the latter basis to the prior year also, that the record was not such that for the year 1927 any deficiency could be assessed, but that for the year 1928 the evidence was such as to disclose that a reorganization had been effected and that the proper basis for computation of depreciation was the cost to the transferring companies, as contended by the Commissioner.

The causes were consolidated for hearing before the Board, and thereafter treated as one proceeding. On July 26, 1935, the board entered a one-member memorandum opinion covering all branches of the consolidated cause, finding in favor of the taxpayer for 1927 and in favor of the Commissioner for 1928. The Commissioner filed his motion in the consolidated cause, for reconsideration and review by the entire Board of this memorandum opinion, alleging that "the decisions" were in error. On August 30 the court ordered that the respondent's motion for review be denied, and that his motion for modification of the memorandum opinion be referred to Member McMahon. On January 15, 1936, it was ordered that the motion for reconsideration and modification of the memorandum opinion, disposing of the tax liability for each of the years, be denied. In view of the fact that the Board never modified its conclusion with respect to the year 1927, and was not asked to modify the same, the Commissioner now contends that the taxpayer's petition for review, having been filed more than three months after July 25, 1935, came too late.

The motion to dismiss must be denied. Where, as here, two cases are consolidated, disposed of in one hearing, by one memorandum opinion and order, and there follow motions for reconsideration or modification of the decision covering the entire cause, taken under consideration and finally disposed of, although one part of the order sought to be reviewed is not attacked, we consider the decision unitary in character. So long as petitions for modification or review are pending, the Board...