MILBREW, INC. AND AMBER LABORATORIES v. Commissioner
| Decision Date | 19 October 1981 |
| Docket Number | Docket No. 4349-76. |
| Citation | 42 TCM (CCH) 1467,1981 TC Memo 610 |
| Parties | Milbrew, Inc. and Amber Laboratories, a wholly owned subsidiary; Martin Bernstein and Ruth Bernstein; Esau Ace Bernstein and Eva Bernstein; Norman N. Bernstein and Freida D. Bernstein; Melvin Bernstein and Sharon Bernstein; Sheldon Bernstein and Estelle Bernstein; Leonard D. Bernstein; Judith R. Bernstein; James E. Bernstein; David B. Bernstein; Jodi L. Bernstein; Richard N. Bernstein; Bradley A. Bernstein; Lynn C. Bernstein; Marcy B. Bernstein; Mary Bernstein Diamond; Howard I. Bernstein and Barbara Bernstein; Howard I. Bernstein; David J. Cunningham and Mary J. Cunningham v. Commissioner. |
| Court | U.S. Tax Court |
Garr W. Steiner, John C. Lapinski, E. Ace Bernstein, 250 E. Wisconsin Ave., Milwaukee, Wis. and Howard I. Bernstein, for the petitioners. Robert E. Dallman, for the respondent.
Memorandum Findings of Fact and Opinion
The following deficiencies are at issue:
___________________________________________________________________________________
Increase Per
Per Statutory Amendments
Name Years Notice To Answer
____________________________________________________________________________________
Esau Ace and Eva Bernstein ................. 1972 $ 28,908.73 $ 6,203.11
1973 38,174.27 9,016.30
Martin and Ruth Bernstein .................. 1972 42,274.92 8,110.41
1973 56,464.95 13,493.46
Melvin and Sharon Bernstein ................ 1972 22,758.89 2,658.90
1973 33,411.97 5,891.79
Norman N. and Freida D. Bernstein .......... 1972 22,773.78 2,661.37
1973 33,358.49 5,869.11
Sheldon and Estelle Bernstein .............. 1972 22,779.12 2,637.54
1973 32,360.68 5,813.03
David J. and Mary J. Cunningham ............ 1972 9,895.96 —0—
1973 11,388.64 —0—
Mary Bernstein Diamond ..................... 1972 1,287.72 195.00
1973 2,528.18 611.48
James E. Bernstein ......................... 1972 1,726.23 186.94
1973 2,322.59 435.60
David B. Bernstein ......................... 1972 1,895.02 186.92
1973 2,660.71 460.91
Jodi L. Bernstein .......................... 1972 1,731.02 186.93
1973 2,463.43 430.60
Howard I. Bernstein ........................ 1972 1,363.50 192.06
Howard I. and Barbara Bernstein ............ 1973 1,853.59 358.67
Leonard D. Bernstein ....................... 1972 1,912.67 186.93
1973 2,872.16 439.65
Judith R. Bernstein ........................ 1972 1,710.29 186.92
1973 2,466.40 435.58
Marcy B. Bernstein ......................... 1972 2,952.46 337.75
1973 4,239.04 797.55
Lynn C. Bernstein .......................... 1972 2,888.21 330.63
1973 4,007.84 784.78
Bradley A. Bernstein ....................... 1972 1,923.40 193.74
1973 2,477.32 435.59
Richard N. Bernstein ....................... 1972 1,852.37 186.93
1973 2,913.59 440.17
Milbrew, Inc. and Amber Laboratories
Inc. ...................................... 1972 140,115.70 —0—
1973 189,781.19 —0—
Totals ..................................... 1972 $310,749.99 $24,642.08
1973 $425,745.04 $45,714.27
___________ __________
$736,495.03 $70,356.35
=========== ==========
____________________________________________________________________________________
Petitioners also claimed various overpayments in their amended petition but have not stated the amount of tax involved in those overpayments.
Due to concessions by the parties, the issues remaining for decision are:
1. Whether the transfer of real and personal property located at 330 Mill Street, Juneau, Wisconsin (the Juneau plant) to NVST Co. (NVST) was a bona fide sale for tax purposes; and, if so, was the sale price set at the property's fair market value;
2. Whether payments made by NVST in connection with the Juneau plant transfer qualify as deductible interest payments;
3. Whether Milbrew properly claimed deductions for rent payments made to NVST for use of the Juneau plant;
4. Whether NVST is entitled to investment credits for 1972 and 1973 for the purchase of certain equipment;
5. Whether a commitment fee paid to obtain a mortgage is a deductible interest expense;
6. Whether the sale and purchase of interests in apartment projects by Ace and Martin Bernstein qualify for tax free treatment under section 1031;2
7. Whether the purported sale of equipment by NVST to EMMNS was a bona fide transaction for tax purposes;
8. Whether respondent correctly determined NVST's depreciable basis in certain properties;
9. Whether respondent correctly determined the useful life of certain real property 10. Whether the partners of NVST are entitled to a deduction claimed by NVST as "accrued interest."
Petitioner, Milbrew, Inc. (Milbrew), is a Wisconsin corporation with its principal place of business in Wisconsin. It filed its Federal income tax returns for 1972 and 1973 with the Internal Revenue Service Center, Milwaukee, Wisconsin. Amber Laboratories, Inc. (Amber), wholly owned by Milbrew is also a Wisconsin corporation. For the years 1972 and 1973, Amber was included, as a consolidated subsidiary, in the Federal income tax returns filed by Milbrew.
Petitioners Martin Bernstein (hereinafter Martin) and his wife, Ruth; Esau Ace Bernstein (hereinafter Ace) and his wife, Eva; Melvin Bernstein and his wife, Sharon; Norman Berntein and his wife, Freida; Sheldon Bernstein and his wife, Estelle; David Cunningham and his wife, Mary; are residents of Wisconsin. Each couple timely filed joint Federal income tax returns for 1972 and 1973 with the Internal Revenue Service Center, Milwaukee, Wisconsin.
Petitioner Howard Bernstein, a resident of Wisconsin, filed his 1972 individual income tax return with the Internal Revenue Service Center, Milwaukee, Wisconsin. For 1973 he filed a joint return with his then wife, Barbara, also a Wisconsin resident, with the Milwaukee Service Center.
Petitioner Mary Bernstein Diamond resided in Ohio when she filed her petition. She filed Federal income tax returns for 1972 and 1973 with the Internal Revenue Service Center, Cincinnati, Ohio.
Petitioners James E. Bernstein, David B. Bernstein, Jodi L. Bernstein, Leonard D. Bernstein, Judith R. Bernstein, Marcy B. Bernstein, Lynn C. Bernstein, Bradley A. Bernstein, and Richard N. Bernstein are residents of Wisconsin, and they filed Federal income tax returns for 1972 and 1973 with the Internal Revenue Service Center, Milwaukee, Wisconsin.
NVST is a limited partnership, organized under Wisconsin law, consisting of the following partners (listed by family group):3
Limited/
Initial Age General
Name Relationship Capital Percentage (as of 1/1/69) Partner
Ace Bernstein Husband/father $2,500.00 6.67 54 General
Eva Bernstein Wife/mother 2,500.00 6.67 49 Limited
Marcy Bernstein Child 1,250.00 3.33 14 Limited
Lynn Bernstein Child 1,250.00 3.33 11 Limited
Martin Bernstein Husband/father 2,500.00 6.67 49 General
Ruth Bernstein Wife/mother 2,500.00 6.67 48 Limited
Sue Ann Weller Child 1,250.00 3.33 21 Limited
Janet Lee Frenz Child 1,250.00 3.33 19 Limited
Norman Bernstein Husband/father 2,500.00 6.67 46 General
Frieda Bernstein Wife/mother 2,500.00 6.67 ? Limited
Howard Bernstein Child 833.33 2.22 17 Limited
Leonard Bernstein Child 833.33 2.22 14 Limited
Judith Bernstein Child 833.33 2.22 11 Limited
Melvin Bernstein Husband/father 2,500.00 6.67 42 General
Sharon Bernstein Wife/mother 2,500.00 6.67 40
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