Warwick Hotel v. United States, Civil Action No. 1435.
| Decision Date | 23 October 1945 |
| Docket Number | Civil Action No. 1435. |
| Citation | 69 F. Supp. 242 |
| Parties | WARWICK HOTEL, Inc., v. UNITED STATES. |
| Court | U.S. District Court — Southern District of Texas |
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Baker, Botts, Andrews & Wharton, of Houston, Tex. (Robert K. Jewett and Thos. E. Mosheim, both of Houston, Tex., of counsel), for plaintiff.
Brian S. Odem, U. S. Atty., and J. K. Smith, Asst. U. S. Atty., both of Houston, Tex., for defendant.
Warwick Hotel, Inc., a Texas corporation (Plaintiff), owns the Warwick Hotel Properties in Houston, in this Division and District. Originally such properties were owned by Warwick, Inc., also a Texas corporation, organized prior to August 1925. Warwick, Inc., placed on the properties a first mortgage, dated August 31, 1925, and in August 1928 (amended in 1930) a second mortgage. In 1931, Warwick, Inc., was in default under both mortgages, and there followed certain proceedings (hereinafter set forth), whereby the title to the properties passed into Plaintiff. Plaintiff claims that by such proceedings, a "reorganization" was effected, and that Plaintiff, in making its Income Tax Return for 1938, was entitled to claim depreciation from October 1926, the date the properties were placed in operation. The Commissioner ruled and the Government contends that such proceedings were not a "reorganization," and that Plaintiff was entitled to depreciation only from the time title passed into Plaintiff on June 20, 1933. Plaintiff claims that this ruling by the Commissioner and claim by the Government resulted in an overpayment of taxes by it for 1938, amounting to $5503.64, plus interest, for which it filed claim, which was rejected, and for which it now prosecutes this suit.
The facts are as follows:
(a) A lengthy Stipulation has been filed, in which substantially all the major facts necessary to decision have been set forth. It is referred to and adopted.
(b) Other facts were brought out at the hearing and in depositions which will be mentioned in the discussion.
1. It seems clear that the proceedings taken under the first mortgage, standing alone, constitute a "reorganization" under the Statute. Helvering v. Limestone, 315 U.S. 179, 62 S.Ct. 540, 86 L.Ed. 775; Palm Springs Holding Corporation v. Commissioner, 315 U.S. 185, 62 S.Ct. 544, 86 L. Ed. 785. But the Government says that the proceedings taken under the second mortgage brings the case under the rule laid down in Marlborough House v. Commissioner, 315...
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