Rees Blow Pipe Manufacturing Company v. Commissioner of Internal Revenue, 19333.
| Decision Date | 08 March 1965 |
| Docket Number | No. 19333.,19333. |
| Citation | 342 F.2d 990 |
| Parties | REES BLOW PIPE MANUFACTURING COMPANY, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. REES BLOW PIPE MANUFACTURING COMPANY, Respondent. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Stephen H. Kaufmann, San Rafael, Cal., for petitioner and cross-respondent.
John B. Jones, Jr., Acting Asst. Atty. Gen., Lee A. Jackson David O. Walter, Jonathan S. Cohen, attys., Dept. of Justice, Washington, D. C., for respondent and cross-petitioner.
Before ORR, HAMLEY and JERTBERG, Circuit Judges.
Rees Blow Pipe Manufacturing Company and the Commissioner of Internal Revenue both petition for review of a decision of the Tax Court of the United States, reported at 41 T.C. 598.
Rees Blow is in the business of manufacturing heating and air-conditioning equipment and incinerators and, insofar as the record indicates, is not in the business of buying, selling or exchanging real property.
In 1954 the company decided to expand its facilities. In a three-way transaction it acquired land in Berkeley, California from Stauffer Chemical Company in exchange for its shop premises in San Francisco, which was acquired by Sanfran Company. In its income tax return for 1954, Rees Blow treated the transaction as nontaxable. Upon the land so acquired Rees Blow erected its new shop building which has since been sold.
In 1955 Sanfran brought suit against Rees Blow in the courts of the State of California, to recover its out-of-pocket loss resulting from the wilful or negligent concealment of a certain defect which made the building unusable as a garage. Sanfran secured judgment for twenty thousand dollars damages, which was affirmed by the District Court of Appeal, First District. Sanfran Company v. Rees Blow Pipe Mfg. Co., 168 C.A.2d 191; 335 P.2d 995. Damages in this amount were measured by the state court as being the difference between the value of the property by Rees Blow and the purchase price which Sanfran had paid for the property.
In its federal income tax return for 1959, Rees Blow claimed a deduction of $22,685.10 for payment of the judgment, litigation costs and interest resulting from the Sanfran lawsuit. During 1960, the company paid legal fees of $3,712.43 in connection with the defense of the described suit. In its income tax return for 1960, Rees Blow deducted this amount.
The Commissioner of Internal Revenue disallowed the deduction taken in 195...
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...344 U.S. 6 (1952); Wener v. Commissioner, 242 F.2d 938 (C.A. 9, 1957); Rees Blow Pipe Manufacturing Co., 41 T.C. 598 (1964), affd. 342 F.2d 990 (C.A. 9, 1965). Nor does he argue that the indemnification of the bonding company and the losses pursuant thereto represent some sort of unusual co......
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Smith v. Comm'r of Internal Revenue, Docket Nos. 1182-66
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