Veterans Foundation v. CIR, 7109.

• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)
• Writing for the Court: PICKETT and SETH, Circuit , and CHRISTENSEN
• Citation: 317 F.2d 456
• Parties: VETERANS FOUNDATION, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Docket Number: No. 7109.,7109.
• Decision Date: 14 May 1963

317 F.2d 456 (1963)

VETERANS FOUNDATION, Petitioner,
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 7109.

United States Court of Appeals Tenth Circuit.

May 14, 1963.

317 F.2d 457

Kline D. Strong, Salt Lake City, Utah, for petitioner.

Benjamin M. Parker, Atty., Dept. of Justice, Washington, D. C. (Louis F. Oberdorfer, Asst. Atty. Gen., and Lee A. Jackson, Robert N. Anderson and Alan D. Pekelner, Attys., Dept. of Justice, Washington, D. C., on the brief), for respondent.

Before PICKETT and SETH, Circuit Judges, and CHRISTENSEN, District Judge.

PICKETT, Circuit Judge.

This is a petition to review a decision of the Tax Court which determined that for the purpose of computing the petitioner's income tax for the fiscal year 1958 its basis for the articles which it had sold in its stores was zero. Veterans Foundation, 38 T.C. 66. The taxpayer is a nonprofit corporation which was organized under the laws of Utah with no authorized shares of capital stock. Every member in good standing of the Utah Department of the Disabled American Veterans is also a member of the taxpayer corporation. It operates two stores in Utah for the sole purpose of selling used clothing, furniture and household appliances which are obtained from residents in the vicinity of Salt Lake City and Ogden, Utah, through the efforts of paid solicitors.¹ Its business inventory consists exclusively of property obtained in this fashion. The net profits are delivered to the Utah Department of the Disabled American Veterans, a tax-exempt charitable organization. The taxpayer, conceding that it operated a business for profit and was a non-exempt "feeder organization" within the meaning of 26 U.S.C. § 502,² contends that each item of personal property donated was a gift, and that in computing its taxable income the donor's cost or the fair market value of the property at the time it was donated should be used for the taxpayer's basis pursuant to 26 U.S.C. § 1015(a). The Tax Court held that each donation of used property constituted a contribution to the capital of the taxpayer under 26 U.S.C. § 362(c), and that the basis of such property should be zero.

In Brown Shoe Co. v. Commissioner, 339 U.S. 583, 70 S.Ct. 820, 94 L.Ed. 1081,

317 F.2d 458

substantial contributions in cash and other property were made to the company by different community groups. These groups were not made up of shareholders as such, and the contributions were made for the purpose of inducing the Brown Shoe Company to locate or enlarge factories at certain places and operate them for a minimum time. It was held that, in determining the corporation's income tax, the contributed property should be accorded a basis for purposes of computing the deduction for depreciation. Following the Brown Shoe...