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Summaries - A

Click on the case name for the complete text.

Ah Pah Redwood Co. v. Commissioner
26 T.C. 1197 (1956).
Rev'd in part and remanded 251 F.2d 163; 58-1 USTC ¶9153; 1 AFTR 2d, 456 (9th Cir. 1957).
On remand 18 T.C.M. 202; P-H T.C. Memo ¶ 59,044 (1959).

Ah Pah Redwood Co. v. Commissioner
251 F.2d 163; 58-1 USTC ¶9153; 1 AFTR 2d,.456 (9th Cir. 1957.).
Reversing in part and remanding 26 T.C., 1197 ( 1956)
On remand 18 T.C.M. 202; P-H T.C. Memo ¶ 59,044 (1959)

In October 1947, Ah Pah Redwood Company acquired California timberlands. Later in the same month, it Permitted Coast Redwood Company to begin cutting timber, under an oral arrangement which required Coast to pay a specified price per thousand board feet as the timber was cut. Cutting continued under this oral arrangement Until January 1950, When Ah Pah, and Coast entered into a formal, written contract for the sale of the remaining timber. Ah Pah treated its income-received under the oral arrangement from April 1948 through 1949 as capital gain under section 117(k)(2). It contended that the oral arrangement of October 1947 was not a disposal within six months after acquiring the timber on the ground that the arrangement was unenforceable when made under the California statute of frauds. It advanced the theory that the oral arrangement was only a cutting license which did not ripen into a contract until each individual tree was severed. The Commissioner contended that the October 1947 arrangement constituted a disposal before the timber had been held by Ah Pah for more than six months, thus making section 117(k)(2) inapplicable. In line with this theory, he claimed that there could be no disposal with each cutting for the reason that Ah Pah had already disposed of its interest in October 1947. He also argued that since section 117(j) is inapplicable to property which is held for sale to customers in the ordinary course of its business and, since section 117(k)(2) merely classifies timber income under section 117(j), it is likewise inapplicable to property so held for sale.
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Ah Pah Redwood Co. v. Commissioner
18 T.C.M. 202, Tax Ct. Mem. Dec. (CCH)23,486(M), (P-H)¶ 59,044 (on rem'd)

[Capital gains and losses: Capital asset defined: Property used in business: Timber.]--Held, on the facts presently before us petitioner did not hold certain timber primarily for sale to customers in the ordinary course of business. Held, further, amounts received by petitioner in 1948 and 1949 from Coast Redwood Co. for timber cut by the latter in those years from the property of petitioner are properly taxable as capital gains on sale of property held for more than six months.
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Alabama Mineral Land Company (1939 Code)
250 F.2d 870, 58-1 USTC ¶ 9162, 1 AFTR2d 468 (5th Cir. 1957) (rev'g in part and rem'g)

Capital gains: Sales of real estate acquired by bondholders through foreclosure.--The bondholders of a railroad company acquired 361,000 acres of Land through foreclosure, and conveyed the land to the taxpayer in 1883 in exchange for its stock. During the taxable years 1943 and 1944, the taxpayer sold some of the remaining land, arid also timber, coal and mineral rights. Profit on these sales was capita] gain, since the property had been acquired by the bondholders for the purpose of liquidation, the transfer to the taxpayer did not endow it with a different purpose, and the taxpayer disposed of the property without platting, subdividing, improving, advertising or listing with brokers.
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Alabama Mineral Land Company v. Commissioner
15 TCM 124, Tax Ct. Mem. Dec. (CCH) 21,557(M), (P-H) ¶ 56,026

[Capital gain v. ordinary income: Sale of timber and mineral properties: Unrecovered March 1, 1913 value of timber: Sale of land: Basis for loss.]--Petitioner corporation was organized in 1883 for the purpose of selling some 361,000 acres of land, together with timber and mineral rights appurtenant thereto, which it acquired from the bondholders of a defunct railroad. From the date of its incorporation to and throughout the years in issue, it continually sold its land, timber, and mineral properties. On its income tax returns for 1943 and 1944, petitioner reported the gain from the sale of such properties as capital gain. Respondent determined that such gain was ordinary income. On its returns for 1943 and 1944, petitioner claimed a depletion deduction on timber sold during such years based on the unrecovered March 1, 1913 value of such timber, which depletion deduction the respondent disallowed in large part. On its return for 1943, petitioner claimed a loss of $28,475.66 on a land sale, which loss is computed on the basis of the difference in the March 1, 1913 fair market value of such land and the selling price. Respondent disallowed such claimed loss. Held, petitioner was regularly engaged in the business of selling land, timber, and mineral properties from the date of its incorporation to and throughout the years in issue, and the gain derived from the sale of such properties during the years 1943 and 1944 was ordinary income. Held, further, the unrecovered March 1, 1913 value of timber which petitioner sold during the years in issue determined. Held, further, petitioner's basis for claiming a loss on the sale of land owned by it on March 1, 1913, is the cost of such land and since no evidence of such cost was introduced, the respondent's disallowance of the claimed loss is sustained.
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Alcoma Association, Inc. v. United States
56-2 USTC ¶ 9612; 51 AFTR 1037 (S.D. Fla. 1956).
Rev'd 239 F.2d 365; 57-1 USTC ¶ 9203;
50 AFTR 1172 (5th Cir. 1956).
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Alcoma Association, Inc. v. United States
239 F.2d 365; 57-1 USTC ¶ 9203; 50 AFTR 1172 (5th Cir. 1956).
Reversing 56-2 USTC ¶ 9612; 51 AFTR 1037 (S.D. Fla. 1956).

A hurricane partially destroyed the taxpayer's citrus groves, reducing their fair market value by $191,500. The adjusted basis of the property was $523,479.77; and the taxpayer claimed a casualty loss of $191,500. The Commissioner agreed that the fair market value had been reduced in that amount but limited the deduction to that percentage of basis which the reduction in value bore to the total before the hurricane. The taxpayer contended that the entire reduction in value was deductible, limited only to an amount not in excess of the adjusted basis of the property.
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Allen Logging & Veneer Co. v. United States
73-2 U.S.T.C. ¶9691, 32 AFTR 2(t 73-5310 (W.D. Wash,, 1973)

On June 29, 1965, the taxpayer, Allen Logging and Veneer Company, was declared the successful bidder at an auction of specified timber and forest products conducted by the Washington State Department of Natural Resources -- the Red Creek Sale. The result of this sale was reported to the Department on June 29,1965, and the taxpayer received a copy :of the report on that day. On July 12, 1965, the State Commissioner of Public Lands formally confirmed the sale, as he was required to do by State statute; The parties subsequently executed a Bill of Sale and a Contract relating to payment for and removal of forest products.

On June 28, 1966, the taxpayer was again declared the successful bidder at an auction of specified timber and forest products conducted by the Department of Natural Resources -- the Winfield Ridge Sale. The result of this sale was reported on June 28, 1966, and the taxpayer received a copy of the report on that day. The Commissioner of Public Lands formally confirmed the sale on July 11, 1966, The parties subsequently executed a Bill of Sale and a Contract relating to payment for and removal of forest products.

During 1966 and 1967, the taxpayer cut other timber eligible for treatment under section 631(a) from various areas in the State of Washington and elected to treat such cutting as a sale or exchange of timber pursuant to section 631(a). Taxpayer also included and elected to treat the cutting of timber from the Red Creek and Winfield Ridge sales as a sale or exchange of timber pursuant to section 631(a). In filing its return for each year, the taxpayer computed the fair market value, as of the first of the year, of the eligible timber cut.

The Commissioner assessed deficiencies against the taxpayer for 1966 and 1967 based upon the determination that the reported fair market value of the eligible timber cut by the taxpayer was incorrect for both years. The Commissioner also contended that the taxpayer should not have included the timber acquired in the Red Creek and Winfield Ridge sales in its 1966 and 1967 returns, contending that the taxpayer did not own, or hold a contract right to cut, this timber for six months prior to the beginning of the respective taxable years since the sales were not approved until July 12 and July 11, respectively.
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Anderson-Tully Company and Subsidiary v. Commissioner
Tax Ct. Mem. Dec. (CCH) 41,315(M), (P-H) ¶ 84,338 (1984)

Expenses--trade or business: Legal expenses: Capital expenditures: Nondeductibles: Title determination: Income expense v. title expense.--A corporate taxpayer was unable to deduct legal fees incurred in the protection of title to timberlands used to produce high quality lumber as an ordinary and necessary business expense. Where litigation involves the defense or perfection of title to property, the origin and character of the claim and not the primary purpose in litigating the claim controls the capitalization or deduction of such litigation expenses. However, if a legal expense is incurred for the protection of an on going business activity, it is deductible if the legal action proximately results from a taxpayer's business. In this instance, the court held that the taxpayer's litigation expenses were for the protection and defense of title to its property and were not incurred for the protection of an on going business activity. Therefore, such expenses constituted nondeductible capital expenditures. Neither lawsuit nor any portion of the fees incurred by the taxpayer concerned the recovery of or an accounting for any severed timber.
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Austin v. Commissioner
74 T.C. No. 98

The taxpayers' residential property contained a row of twenty pine trees parallel to the power lines servicing the house. In 1975 the power company removed four trees and all of the branches from the side closest to the power line of each remaining tree. After inspecting the sixteen remaining trees the taxpayers determined that the absence of branches on one side might cause the trees to break off or uproot during an ice storm and damage their residence. Accordingly, at the request of the taxpayers, the power company removed the remaining trees.

The taxpayers claimed a casualty loss deduction with respect to the sixteen trees under Section 165(c)(3)which applies to losses arising from fire, storm, shipwreck, or be other casualty, or from theft.
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Averyt v. Commissioner
T.C. Memo. 2012-198; Nos. 18034-10, 18035-10, 18036-10, 18037-10

The issue is whether petitioners have satisfied the substantiation requirements of section 170(f)(8) with respect to the contribution of a conservation easement through their limited liability company, Cook's Mountain Timber, LLC (CMT).

CMT conveyed a conservation easement to Wetlands America Trust, Inc. (WAT), on 1,092.069 acres of land it owned in Richland County, South Carolina. WAT is a tax-exempt organization that was founded in 1985 to expand the mission of Ducks Unlimited, Inc. (DU), to protect wetlands. DU is the sole member of WAT, and WAT operates as a fiduciary for DU and manages its endowments.
The deed by which CMT conveyed the conservation easement to WAT (conservation deed) includes, inter alia, the following statements about the transfer of the conservation easement:

WHEREAS, Grantor and Grantee recognize the natural, scenic, aesthetic, and special character and opportunity for enhancement of the Protected Property, and have the common purpose of the conservation and protection in perpetuity of the Protected Property as "a relatively natural habitat of fish, wildlife or plants or similar ecosystem" as that phrase is used in 26 USC 170(h)(4)(A)(ii) and Section 170(h)(4)(A)(ii) of the Internal Revenue Code of 1986, as amended ("the Code"), and in regulations promulgated thereunder by placing voluntary restrictions upon the use of the Protected Property and by providing for the transfer from the Grantor to the Grantee of affirmative rights for the protection of the Protected Property; and so as to qualify as a contribution of a "qualified conservation contribution" as that term is defined under Section 170(h)(2)(C) of the Code * * *
* * * * * * *

DU mailed to each petitioner member a letter acknowledging its receipt of the conservation easement and his individual cash contribution of $6,250. Letters from DU failed to inform petitioner members how much of each payment was a deductible contribution, even had the payment occurred in the context of a fundraising campaign the letters would fail to satisfy the requirements of Rev. Proc. 90-12, supra. Accordingly, the letters fail to satisfy the requirements for a contemporaneous written acknowledgment pursuant to section 170(f)(8) and Rev. Proc. 90-12, supra.

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