United States v. Transamerica Corporation
| Decision Date | 08 March 1968 |
| Docket Number | No. 21490,21490 |
| Citation | 392 F.2d 522 |
| Parties | UNITED STATES of America, Appellant, v. TRANSAMERICA CORPORATION, Appellee. TRANSAMERICA CORPORATION, Appellant, v. UNITED STATES of America, Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Gilbert Andrews, Jr. (argued), Atty., Dept. of Justice, Lee A. Jackson, J. Edward Shillinburg, Dept. of Justice, Mitchell
Rogovin, Asst. Atty. Gen., Washington, D. C., Cecil F. Poole, U. S. Atty., Richard L. Carico, Asst. U. S. Atty., San Francisco, Cal., for appellant and cross-appellee.
George H. Koster (argued), of Koster, Kohlmeier & Graham, San Francisco, Cal., for appellee and cross-appellant.
Before HAMLEY, JERTBERG and MERRILL, Circuit Judges.
Transamerica Corporation has brought suit for refund of federal income taxes for the year 1958. From judgment of the District Court for the Northern District of California cross appeals have been taken. The opinion of the District Court, sub nom. Transamerica Corporation v. United States, appears at 254 F. Supp. 504 (1966).
The question presented is the deductibility of expenses incurred by taxpayer Transamerica in carrying out a plan of divestment of banking assets in compliance with the Bank Holding Company Act of 1956, 12 U.S.C. §§ 1841-1848, and the complementary sections of the Internal Revenue Code, 26 U.S.C. §§ 1101-1103.
The plan followed by taxpayer involved the organization of Firstamerica Corporation to which taxpayer's bank assets were transferred in exchange for stock which was then distributed to taxpayer's stockholders. The details of this plan are fully set forth in the opinion of the District Court.
The District Court rejected the Government's contention that the dominant purpose, or net effect, of the plan was that of a spin-off, or "D" reorganization, 26 U.S.C. § 368(a) (1) (D), the expenses of which should be capitalized under the normal rule as to reorganization expenses. Instead the court ruled that the plan, in essence, was a liquidation of taxpayer's bank assets, the expenses of which were currently deductible as ordinary and necessary business expenses, as is the rule with respect to other forms of partial liquidation.
For the reasons set forth in the District Court opinion we agree. Our views are reinforced by the recent decision in United States v. General Bancshares Corp., 388 F.2d 184 (8th Cir. 1968).
On the appeal of the United States judgment is affirmed.
The question presented is the deductibility as a charitable contribution under § 170(c) (1) of the Internal Revenue Code of 1954, 26 U.S.C. § 170(c) (1), of real property transferred and cash paid to the City of Oakland, California by General Metals Corp., an affiliate of the taxpayer included in its consolidated 1958 return.
The property involved, known as "85th Avenue," was used by its owner as a street in connection with its manufacturing activities, and also was used by its employees and members of the public. The corporation had no intention of improving the property for its own purposes, but had been "harassed," "badgered" and "threatened" by the City to improve it for the benefit of the public.
In this context of compulsion the corporate owner entered into a written contract with the City, pursuant to which the land was conveyed to the City and a sum of money paid toward cost of improvement. The District Court rejected the taxpayer's contention that this constituted a charitable contribution and held that it constituted a capital expenditure. We agree with the result but depart, in one respect, from the reasons assigned by the District Court in its opinion.
Relying upon this court's holding in DeJong v. Commissioner of Internal Revenue, 309 F.2d 373 (9th Cir. 1962), the court held that the taxpayer had "the burden of proving that this contribution to the City of Oakland was made from a detached and disinterested generosity or from affection, respect, admiration, charity or like impulses * * * rather than for obvious business reasons * * *." 254 F.Supp. at 514-515.
This language was drawn from Commissioner of Internal Revenue v. Duberstein, 363 U.S. 278, 80 S.Ct. 1190, 4 L. Ed.2d 1218 (1960), which dealt not with charitable contributions but with the exclusion of a gift from income of the recipient under section 102 of the Internal Revenue Code. In DeJong this court held that the D...
To continue reading
Request your trial
-
Southern Pacific Transp. Co. v. Comm'r of Internal Revenue
...170 deduction. For example, see the following cases questioning or rejecting the Duberstein criteria: United States v Transamerica Corp 392 F.2d 522 (9th Cir. 1968); Stubbs v United States 428 F.2d 885 (9th Cir. 1970); Allen v United States 541 F.2d 786 (9th Cir. 1976); Singer v United Stat......
-
Foster v. Comm'r of Internal Revenue
...been particularly active in refining Duberstein's standard for cases involving business entities. In United States v. Transamerica Corp., 392 F.2d 522, 524 (9th Cir. 1968), the Court of Appeals held that an indirect business benefit, “such as one incidental to the public use or to public re......
-
U.S. v. Tsanas
...or like impulses," in the case of a corporation. Compare Joshel v. CIR, 296 F.2d 645, 647 (10 Cir. 1961); United States v. Transamerica Corp., 392 F.2d 522, 524 (9 Cir. 1968). We find no merit in this. Duberstein itself involved an alleged gift by a corporation, 363 U.S. at 281, 80 S.Ct. 11......
-
Graham v. C.I.R.
...benefit as sufficient to bar a section 170 deduction, see Collman, 511 F.2d at 1267; Stubbs, 428 F.2d at 887; United States v. Transamerica Corp., 392 F.2d 522, 524 (9th Cir.1968), we have not held that the receipt of an economic benefit is the exclusive indicium of a nonqualifying transact......
-
Indopco v. Commissioner: the Supreme Court takes National Starch to the cleaners.
...the insurance premium. Id. at 428; see El Paso Co. v. United States, 694 F.2d 703 (Fed. Cir. 1982); Transamerica Corp. v. United States, 392 F.2d 522, 523 (9th Cir. Severance Payments or Exercise of Stock Options. Nowhere is the requirement for a nexus more clearly illustrated than in the j......
-
Contributions of Land to Governmental Bodies
...is, no special ties where the donor contributed property for a school site. But see Transamerica Corp, 68-1 U.S.T.C. para. 9279, 392 F.2d 522 (9th Circuit 1968), where a contrary result held that there was a transfer of property to a municipality for increasing the size of the streets. The ......
-
Deductibility of legal expenses in corporate reorganizations.
...(or change of law or regulation), the transferor corporation has been allowed to deduct expenses. For instance, in Transamerica Corp., 392 F2d 522 (9th Cir. 1968), a bank was allowed to deduct fees (including legal fees, transfer fees, printing costs and other expenses associated with the d......