Southern Pacific Transp. Co. v. Comm'r of Internal Revenue
| Citation | 75 T.C. 497 |
| Decision Date | 31 December 1980 |
| Docket Number | Docket No. 3493-69. |
| Parties | SOUTHERN PACIFIC TRANSPORTATION COMPANY, PETITIONER V COMMISSIONER of INTERNAL REVENUE, RESPONDENT v. COMMISSIONER of INTERNAL REVENUE, RESPONDENT |
| Court | United States Tax Court |
75 T.C. 497
SOUTHERN PACIFIC TRANSPORTATION COMPANY, PETITIONER V COMMISSIONER of INTERNAL REVENUE, RESPONDENT
v.
COMMISSIONER of INTERNAL REVENUE, RESPONDENT
Docket No. 3493-69.
United States Tax Court
Filed December 31, 1980.
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¦CONTENTS ¦
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¦Headnote ¦499 ¦
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¦Opinion (Introduction) ¦505 ¦
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¦General Findings of Fact ¦506 ¦
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¦I. ¦Issue (i) : Rapid Amortization of Freight Cars ¦515 ¦
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¦ ¦Findings of Fact ¦515 ¦
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¦ ¦Opinion ¦534 ¦
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¦II. ¦Issues (hh) and (9) : Recovery Upon Merger ¦ ¦
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¦ ¦of Previously Deducted Amounts ¦548 ¦
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¦ ¦Findings of Fact ¦549 ¦
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¦ ¦Opinion ¦557 ¦
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¦III. ¦Issue (kk) : Deduction of Timber Expenses ¦567 ¦
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¦ ¦Findings of Fact ¦567 ¦
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¦ ¦Opinion ¦577 ¦
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¦IV. ¦Issues (w) and (x) : Deductions Involving Houston Depot ¦586 ¦
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¦ ¦Findings of Fact ¦587 ¦
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¦ ¦Opinion ¦594 ¦
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¦V. ¦Issue (rr) : Deductions Incident to Relocation Projects ¦605 ¦
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¦ ¦Findings of Fact ¦605 ¦
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¦ ¦Opinion ¦612 ¦
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¦VI. ¦Issue (bbb) : Deduction of Estimated Payroll ¦ ¦
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¦ ¦Taxes on Earned Vacation Pay ¦624 ¦
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¦ ¦Findings of Fact ¦625 ¦
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¦ ¦Opinion ¦632 ¦
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¦VII. ¦Issue (zz) : Deduction of Penalties for ¦ ¦
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¦ ¦Violations of Federal Statutes ¦643 ¦
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¦ ¦Findings of Fact ¦643 ¦
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¦ ¦Opinion ¦646 ¦
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¦VIII.¦Issue (ll) : Freight Car Useful Life ¦655 ¦
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¦ ¦Findings of Fact ¦655 ¦
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¦ ¦Opinion ¦660 ¦
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¦IX. ¦Issue (yy) : Deduction of Embankment Expenditures ¦672 ¦
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¦ ¦Findings of Fact ¦672 ¦
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¦ ¦Opinion ¦680 ¦
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¦X. ¦Issue (mm) : Diesel Locomotive Useful Life ¦687 ¦
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¦ ¦Findings of Fact ¦688 ¦
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¦ ¦Opinion ¦702 ¦
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¦XI. ¦Issue (g) : Welded Rail ¦709 ¦
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¦ ¦Findings of Fact ¦709 ¦
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¦ ¦Opinion ¦717 ¦
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¦XII. ¦Issues (l) and (ccc) : Relay Rail ¦726 ¦
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¦ ¦Findings of Fact ¦726 ¦
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¦ ¦Opinion ¦732 ¦
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¦XIII.¦Issue (aaa) : Depreciation of Replacement Facilities ¦746 ¦
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¦ ¦Findings of Fact ¦746 ¦
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¦ ¦Opinion ¦757 ¦
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¦XIV. ¦Issue (pp) : Grading and Tunnel Bore Useful Life ¦769 ¦
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¦ ¦Findings of Fact ¦769 ¦
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¦ ¦Opinion ¦788 ¦
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¦XV. ¦Issues (pp) and (qq) : Historical Costs as Tax Basis ¦807 ¦
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¦ ¦Findings of Fact ¦808 ¦
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¦ ¦Opinion ¦826 ¦
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¦XVI. ¦Issue (p) : Adjustment for Interest and Taxes During ¦843 ¦
¦ ¦Construction ¦ ¦
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¦ ¦Findings of Fact ¦843 ¦
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¦ ¦Opinion ¦845 ¦
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¦Conclusion ¦850 ¦
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I. Issue (i: RAPID AMORTIZATION OF FREIGHT CARS. On its consolidated income tax returns for the years 1959, 1960, and 1961, petitioner claimed rapid amortization under sec. 168, I.R.C. 1954 (as then applicable), with reference to freight cars certified by the Office of Defense Mobilization in 1956 as necessary in the interest of national defense. Respondent claims herein that the certifying agency intended all freight cars covered by the 1956 certification to be acquired by petitioner no later than Dec. 31, 1957, and that freight cars delivered to petitioner after Feb. 20, 1958, are therefore not within the scope of the certification. Accordingly, since certification is a statutory prerequisite, respondent has disallowed rapid amortization under sec. 168, I.R.C. 1954, for cars delivered after Feb. 20, 1958. Held the Office of Defense Mobilization, in issuing the 1956 necessity certificate, intended petitioner to acquire the certified cars as quickly as possible under the prevailing conditions and did not necessarily intend to preclude from certification those cars delivered to petitioner after Dec. 31, 1957. Held further petitioner acquired certified freight cars through the years at issue as quickly as was possible under the prevailing conditions, and petitioner is therefore entitled to the benefits of sec. 168, I.R.C. 1954, with reference to those cars. (Pp. 515-548.)
II. Issues (hh and (9): RECOVERY UPON MERGER OF PREVIOUSLY DEDUCTED AMOUNTS. During the years 1915 to 1924, the predecessor Southern Pacific Co. (PSP) had to...
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