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Summaries - E

Click on the case name for the complete text.

Ellingson Timber Co., et al. v. Commissioner
36 TCM 809, Tax Ct. Mem. Dec. (CCH) 34,478(M), (P-H) ¶ 77,197 (1977)

Natural resources: Cutting of timber: Fair market value: Sale or exchange.--The Tax Court determined the fair market value of standing timber by analyzing expert testimony as to the value of the timber cut on the relevant date, comparable sales and transactions made by the United States Forest Service.
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Ellison v. Frank
56-2 USTC ¶ 9760, ¶ 9763, 51 AFTR 1423 (W.D. Wash. 1956).
Aff'd 245 F.2d 837; 57-2 USTC ¶ 9748; 51 AFTR 807 (9th Cir. 1957).
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Ellison v. Frank
245 F.2d 837; 57-2 USTC ¶ 9748; 51 AFTR 807 (9th Cir. 1957).
Affirming 56-2 USTC ¶9760, ¶ 9763; 51 AFTR 1423 (W.D. Wash. 1956).

Northwest Door Company acquired a contract right to cut timber situated on U.S. Forest Service lands, and it engaged Ellison to perform the logging operations. The contract described Northwest as owner and Ellison as logger, required Ellison to perform all conditions required of Northwest under the Forest Service contract, specified that all logs became the property of Northwest, and stated that Ellison's only interest was his right to receive as compensation the market price of the logs. Ellison agreed to assume certain costs of the logging, and Northwest advanced operating funds to him. Ellison elected to report his income from the contract as capital gain under section 117(k)(1). The Commissioner contended that Ellison was not qualified to elect under section 117(k)(1) because he neither owned the timber nor had a contract right to cut it. Ellison contended that he was the equitable owner of the timber.
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Emmerson v. Commissioner
44 T.C. 86 (1965)

Taxpayers were sole members of a partnership which sold timber to a milling corporation, of which taxpayers were the sole shareholders. The partnership and corporation executed an agreement which provided that, in the event the Commissioner or a court determined the purchase price for timber exceeded fair market value, such excess would be repaid to the corporation. For sales in 1959 and 1960, the partnership reported gains on the sale of timber as capital gains pursuant to section 631(b) and the corporation reported the amount paid as the costs of goods sold. In 1963, the Commissioner determined that the prices paid ($80 and $100 per 1,000 board feet in 1959 and 1960, respectively) were in excess of fair market value ($35 per 1,000 board feet). The corporation agreed to the recomputation of its tax liability, based on a reduction in cost of goods sold upon resale of the timber purchased from the partnership. The Commissioner determined, however, that amounts paid in excess of fair market value of the timber also constituted taxable dividends from the corporation to taxpayers. Taxpayers contended that such amounts were properly accounted for as capital gains derived by the partnership.
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Esgar Corporation, et al. v. Commissioner
T.C. Memo. 2012-35; Docket Nos. 23676-08, 23688-08, 23689-08

The taxpayers granted qualified conservation easements to a qualified conservation organization in 2004, reporting noncash charitable contributions on their respective 2004 tax returns. The commissioner determined deficiencies in income tax, based in part on the commissioner's determination that the taxpayers had overstated the value of the conservation easements. The commissioner also determined sec. 6662(a), I.R.C., accuracy-related penalties against the Holmeses and the Tempels.
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Everett v. Commissioner
37 T.C.M. 53(1978)

In order to finance the purchase of certain timber property, the taxpayer decided to sell some timber rights he had purchased a year earlier for an investment, and he gave an option to a potential buyer to buy the timber rights on an installment basis. The option holder was unable to obtain financing for the purchase, and the taxpayer considered the transaction to be at an end. The taxpayer was then advised that he might be able to exchange his timber rights for the property he wished to purchase, and an exchange was negotiated with a broker who had an option on the property desired by' the taxpayer. Knowing the earlier interest in taxpayer's timber rights, the broker negotiated to sell the timber rights to the party whose original option with the taxpayer had fallen through. The properties were exchanged in a mutual closing in which the taxpayer transferred his timber rights to the broker in exchange for timber rights on the property he desired; the land part of the property was sold by the broker to a corporation formed by the taxpayer and an associate; and the timber rights previously owned by the taxpayer were sold by the broker to the party who originally had the option on the rights. At the closing, the original option on taxpayer's timber rights was formally cancelled. The taxpayer treated the transaction as a tax free exchange of like-kind property under Section 1031(a) of the Code. However, the Commissioner of Internal Revenue contended that the transaction did not qualify as tax free because (a) property held for sale to customers in the ordinary course of a trade or business does not qualify for such treatment and that is what the taxpayer's timber rights had become when he gave an option for their purchase, or (b) the reality of the transaction was that the original option was never cancelled and the broker's sale of taxpayer's timber rights to the original option holder was on taxpayer's behalf.
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Everson v. United States
95-1 USTC ¶50,150, U.S. District Court, Dist. Mont.,

Depreciation: Farmers: Soil conservation expenditures: Trees.--A couple was not entitled to claim depreciation or investment credits for trees and bushes that were planted on their farm as a wind break because the trees did not produce revenue. The trees and bushes were planted under a soil conservation program and were intended to reduce moisture evaporation and soil erosion. The trees served a non-revenue producing purpose and, as such, were part and parcel of the farm realty rather than depreciable business assets of the farm.
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Everson v. United States
97-1 USTC ¶50,258, (CA-9) (aff'g. and rev.)

Depreciation: Investment tax credit: Farmers: Soil conservation expenditures: Trees.--A married couple was denied a depreciation deduction and investment tax credit for the cost of trees and bushes planted on a farm under a soil conservation program to serve as a wind break and as a means of reducing moisture evaporation and soil erosion. The trees and bushes served a non-revenue producing purpose and were considered part of farm realty rather than depreciable assets.
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