Kramertown Company, Inc. v. CIR, No. 73-2809 Summary Calendar.

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Writing for the CourtWISDOM, AINSWORTH and CLARK, Circuit
Citation488 F.2d 728
PartiesThe KRAMERTOWN COMPANY, INC., Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
Decision Date23 January 1974
Docket NumberNo. 73-2809 Summary Calendar.

488 F.2d 728 (1974)

The KRAMERTOWN COMPANY, INC., Petitioner-Appellant,
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.

No. 73-2809 Summary Calendar.*

United States Court of Appeals, Fifth Circuit.

January 23, 1974.


488 F.2d 729

Charles Delbert Hosemann, Jr., Charles L. Brocato, Jackson, Miss., for petitioner-appellant.

Scott P. Crampton, Meyer Rothwacks, Asst. Attys. Gen., Tax Div., U. S. Dept. of Justice, Leonard J. Henzke, Jr., Lawrence B. Gibbs, Acting Chief Counsel, I. R. S., Alfred S. Lombardi, Tax Div., Dept. of Justice, Washington D. C., for respondent-appellee.

Before WISDOM, AINSWORTH and CLARK, Circuit Judges.

CLARK, Circuit Judge:

The Kramertown Company (taxpayer) appeals from the tax court's holding that the cost of certain rooftop air conditioning and heating units was not eligible for the investment credit.1 We affirm.

The facts relevant to this appeal were mainly stipulated and are in part as follows. Taxpayer is the owner of a seven store shopping center. It provides rooftop heating and air conditioning units to six of the center's store tenants pursuant to negotiated leases.2 The eleven units provided for these six stores cost the taxpayer 69,021.71 dollars. These dual energy units are supplied with natural gas and electric energy from the interior of the stores. The gas lines run through an exterior cutoff valve before reaching the point of connection to the units which is a pipe coupling. The electric lines run through an exterior weather-proof disconnect switch box before the ultimate point of connection to the units. The units themselves rest upon wood runners or steel beams laid upon the finished surface of the roof and are not directly attached to the building. However, the units are connected to permanent ducts which lead through the roof surface into the store they service. These same ducts distribute treated air throughout the inside of the store.

Section 38(a) of the Internal Revenue Code of 1954 provides for a credit against income tax for investment in certain depreciable property. Section 48 of the Code defines "Section 38 property" as tangible property but "not including a building and its structural components." Since these heating and air conditioning units are clearly tangible property, the issue presented by this appeal turns upon whether the units are structural components of a building for purposes of Section 48.

Treas. Reg. 1.48-1(e)(2) provides: "the term `structural components' includes such parts of buildings as walls, partitions, floors and ceilings, as well as any permanent coverings therefor, such as paneling or tiling; windows and doors, all components (whether in, on, or adjacent to the building) of a central air conditioning or heating system, including motors, compressors, pipes and ducts." The tax court held each of the rooftop units in the instant case to be a component of the storewide central air conditioning system of which it is a part within Treas.Reg. 1.48-1(e)(2). Although it is based on facts that were mainly stipulated, this ultimate factual conclusion is binding if it is a permissible inference even though this court might have reached a contrary result had it been the trier of fact. Moreover, our independent review of the facts leaves us without the slightest doubt that these combination air conditioning and heating units, are as much parts of a central system for each store as such units would be if they had been built into the roof or walls or otherwise more permanently integrated with the other internal components.

488 F.2d 730

The taxpayer argues that the effect of Treas.Reg. 1.48-1(e)(2) and the interpretive revenue rulings is contrary to the intent of Congress in two respects: (1) they fail to adequately distinguish between individual air conditioning units and a central air conditioning system as required by the legislative history of Section 38; (2) they fail to accord enough significance to state fixtures law and employ a test contrary to the Eighth Circuit's decision in Minot Federal Savings and Loan v. United States, 435 F.2d 1368 (1970).

The technical explanation of the Revenue Act of 1962 contained in the Senate Report states:

Assets accessory to the operation of a business such as .
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26 practice notes
  • Illinois Cereal Mills, Inc. v. C.I.R., No. 85-1485
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • April 28, 1986
    ...fixtures and, therefore, technically real property) would still qualify for the ITC. Kramertown Co. v. Commissioner of Internal Revenue, 488 F.2d 728, 731 (5th Cir.1974); H.R.Rep. No. 1447, 87th Cong., 2d Sess. 11-12 (1962); S.Rep. No. 1881, 87th Cong., 2d Sess. 16 The test for "other ......
  • Hosp. Corp. of America & Subsidiaries v. Comm'r of Internal Revenue, No. 10663–91
    • United States
    • United States Tax Court
    • July 24, 1997
    ...land? Movability itself is not the controlling factor in deciding whether the property lacks permanence. Kramertown Co. v. Commissioner, 488 F.2d 728, 731 (5th Cir.1974), affg. T.C. Memo.1972–239; see also Consolidated Freightways v. Commissioner, 708 F.2d 1385, 1390 (9th Cir.1983) (a varie......
  • Texas Instruments Incorporated v. Commissioner, Docket No. 32707-88.
    • United States
    • United States Tax Court
    • May 27, 1992
    ...component, citing Everhart v. Commissioner [Dec. 32,241], 61 T.C. 328, 331 (1973), and Kramertown Co. v. Commissioner [74-1 USTC ¶ 9196], 488 F.2d 728, 731 (5th Cir. 1974), affg. [Dec. 31,622(M)] T.C. Memo. 1972-239. In that case, we considered the Whiteco (Whiteco Industries, Inc. v. Commi......
  • Anderson, Clayton & Co. v. U.S., No. 75-2573
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • November 11, 1977
    ...characterized as a legislative rule, it is as binding on a court as a statute. See Kramertown, Inc. v. Commissioner of Internal Revenue, 488 F.2d 728 (5th Cir. 1974); K. Davis, Administrative Law § 5.03 (3d ed. 1972). Before addressing the questions whether Treas.Reg. § 1.902-3(d)(1) is val......
  • Request a trial to view additional results
26 cases
  • Illinois Cereal Mills, Inc. v. C.I.R., No. 85-1485
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • April 28, 1986
    ...fixtures and, therefore, technically real property) would still qualify for the ITC. Kramertown Co. v. Commissioner of Internal Revenue, 488 F.2d 728, 731 (5th Cir.1974); H.R.Rep. No. 1447, 87th Cong., 2d Sess. 11-12 (1962); S.Rep. No. 1881, 87th Cong., 2d Sess. 16 The test for "other ......
  • Hosp. Corp. of America & Subsidiaries v. Comm'r of Internal Revenue, No. 10663–91
    • United States
    • United States Tax Court
    • July 24, 1997
    ...land? Movability itself is not the controlling factor in deciding whether the property lacks permanence. Kramertown Co. v. Commissioner, 488 F.2d 728, 731 (5th Cir.1974), affg. T.C. Memo.1972–239; see also Consolidated Freightways v. Commissioner, 708 F.2d 1385, 1390 (9th Cir.1983) (a varie......
  • Texas Instruments Incorporated v. Commissioner, Docket No. 32707-88.
    • United States
    • United States Tax Court
    • May 27, 1992
    ...component, citing Everhart v. Commissioner [Dec. 32,241], 61 T.C. 328, 331 (1973), and Kramertown Co. v. Commissioner [74-1 USTC ¶ 9196], 488 F.2d 728, 731 (5th Cir. 1974), affg. [Dec. 31,622(M)] T.C. Memo. 1972-239. In that case, we considered the Whiteco (Whiteco Industries, Inc. v. Commi......
  • Anderson, Clayton & Co. v. U.S., No. 75-2573
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • November 11, 1977
    ...characterized as a legislative rule, it is as binding on a court as a statute. See Kramertown, Inc. v. Commissioner of Internal Revenue, 488 F.2d 728 (5th Cir. 1974); K. Davis, Administrative Law § 5.03 (3d ed. 1972). Before addressing the questions whether Treas.Reg. § 1.902-3(d)(1) is val......
  • Request a trial to view additional results

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