• Home
• Federal Income Taxes
• State Tax Laws
• Estate Planning
• Publications
• Professional Research
  • Master Index
  • Case Law
  • Revenue Rulings
  • Private Letter Rulings
  • Regulations
  • Internal Revenue Code
  • Public Laws
  • Research Process
• Tax Workshops/Education
• Tax Policy
• Links

Summaries - G

Click on the case name for the complete text.

Gammill v. Commissioner
62 T.C. No. 70(1974).

Taxpayers were parties to Crosby v. United States, 414 F; 2d 822 (5th Cir. 1969) [6 T.T.J. 148], in which the 1961, 1962, and 1963 income from timber sale contracts was held ineligible for capital gains treatment. Taxpayers brought this suit for refunds of taxes paid on the income under the same contracts for the years 1964 through 1969, claiming that the proceeds should be treated as long-term capital gains, resulting from either a disposal with a retained economic interest under section 631(b) or, in the alternative; an outright sale under section 1221 or 1231. The Commissioner moved for summary judgment on the ground that taxpayers were collaterally estopped from relitigating the issue of how the Proceeds from the contract should be treated. Taxpayers contended that collateral estoppel could not be invoked because, with respect to the sections involved in their claims, either the "legal atmosphere" or the controlling facts had changed.
Adobe PDF (5KB)

Gaskins v. United States
67-2 USTC ¶9662; 20 AFTR. 2d 5144 (M.D. Ga. 1966).
Aff'd 381 F.2d 729; 67-2 USTC ¶9663, 20 AFTR 2d 5577 (5th Cir. 1967).

The taxpayer had an oral agreement with a second party under which the second party cut and purchased standing timber owned by the taxpayer. Both the taxpayer and the purchaser testified that the taxpayer could have terminated the purchaser's cutting of the timber at any time. The taxpayer treated his profits from the sales as capital gain under section 631(b) of the Code. The government contended that the taxpayer's profits constituted ordinary income.
Adobe PDF (10KB)

Gaskins v. United States
381 F.2d 729, 67-2 U.S. Tax Cas. ¶9663, 20 Am. Fed. Tax R.2d 5577 (5th Cir. 1967).
Affirming 67-2 U.S. Tax Cas. ¶9662, 20 Am. Fed. Tax R.2d 5144 (1966).

The taxpayer had an oral agreement with a second party under which the second party cut and purchased standing timber owned by the taxpayer. Both the taxpayer and the purchaser testified that the taxpayer could have terminated the purchaser's cutting of the timber at any time. The taxpayer treated his profits from the sales as capital gain under section 63l(b) of the Code. The government contended that the taxpayer's profits constituted ordinary income.
Adobe PDF (7KB)

Georgia Pacific Corp. v. United States
78-2 U.S.T.C. ¶9811, 43 AFTR 2d 79-337 (1978)

Georgia-Pacific Corporation ("G-P") entered into timber cutting contracts with two of its wholly-owned subsidiaries. In one contract, G-P was the seller, and in the other it was the buyer. In the consolidated tax return filed by the G-P affiliated group of corporations, the income from the cutting contracts was treated as capital gain under Section 631(b). In addition, the members of the affiliated group who were the purchasers under the cutting contracts took depletion deductions reflecting payments made for the timber. The Internal Revenue Service agreed that the cutting contracts qualified under Section 631(b), However, it claimed that Treasury Regulations applicable to consolidated returns of affiliated corporations require that the income for the cutting contracts be treated as ordinary income.
Adobe PDF (23KB)

Georgia Pacific Corp. v. United States
648 F.2d 653, 81-2 U.S.T.C. ¶9515, 48 AFTR2d 81-5484
Affirming 78-2 U.S.T.C. ¶9811, 43 AFTR2d 79-337

Georgia-Pacific Corporation ("G-P") entered into timber cutting contracts with two of its wholly-owned subsidiaries. In one contract, G-P was the seller, and in the other it was the buyer. In the consolidated tax return flied by the G-P affiliated group of corporations, the income from the cutting contracts was treated as capital gain under Section 631(b). In addition, the members of the affiliated group who were purchasers under the cutting contracts took depletion deductions reflecting payments made for the timber. The Internal Revenue Service agreed that the cutting contracts qualified under Section 631(b). However, it claimed that Treasury Regulations applicable to consolidated returns of affiliated corporations require that the income for the cutting contracts be treated as ordinary income.
Adobe PDF (32 KB)

Gilmore v. United States
180 F. Supp. 354; 60-1 USTC ¶ 9259; 5 AFTR 2d 685 (Ct. Cl. 1960).

Pope & Talbot, Inc. acquired the right to cut timber on a tract of land, subject to specified stumpage payments lo the landowner. Pope & Talbot later determined that its logging operations under the contract were unprofitable and it entered into a logging contract with the partnership of which the taxpayers were members. This partnership agreed to cut the timber, subject to the payment to Pope & Talbot of stumpage identical to that being paid by Pope & Talbot to the landowner. The partnership was required to deliver all logs to a log dump specified by Pope & Talbot and was to receive the market price at the time of delivery. Although Pope & Talbot was given the right to supervise logging operations, it did not do so. The contract, which referred to the partnership as purchaser, did not expressly prohibit sales to others, but it did not expressly permit them, and the partnership, in fact, sold all of its logs to Pope & Talbot. Pope & Talbot had the right to order cessation of cutting if it could not use the logs and, in this event, the partnership had the express right to sell felled timber to other purchasers provided that Pope & Talbot did not exercise a first option to purchase. The partnership elected !o treat its cutting of the timber as a sale or exchange under sections 117(k)(1) and 631(a). The Commissioner contended that the partnership neither owned nor held a contract right to cut the timber, and thus was not qualified to elect under section 117(k)(1) or 631(a). In his view, the partnership was merely logging the timber for compensation.
Adobe PDF (28KB)

Giustina v. United States
190 F. Supp. 303; 61-1 USTC ¶ 9169; 7 AFTR 2d 381 (D. Ore. 1960).
Aff'd 313 F.2d 710; 63-1 USTC ¶ 9145; 11 AFTR 2d 307 (9th Cir. 1962).

Plaintiffs prosecute these actions, consolidated for trial, for the recovery of individual income taxes, plus interest, assessed against and collected from them for their taxable years ending December 31, 1949 and 1950.
Adobe PDF (51KB)

Giustina v. United States
313 F.2d 710; 63-1 USTC ¶ 9145; 11 AFTR 2d 307 (9th Cir. 1962).
Affirming 190 F. Supp, 303; 61-1 USTC ¶ 9169; 7 AFTR 2d 381 (D. Ore. 1960).

The Giustina partnership submitted a bid at a "timber sale auction" held by the U. S. Forest Service, and it was notified on March 11, 1948, that its bid had been accepted. A timber sale agreement was executed by the partnership on March 12, 1948, and by the Forest Service on April 2, 1948. The agreement referred to the partnership as purchaser of the timber; but it stipulated that title to the timber was to remain in the United States until it was cut and paid for. The agreement required the Partnership to cut and remove the timber within a limited period, to pay for all timber whether or not actually cut and removed, and to make substantial advance payments of the purchase price. On July 1, 1948, the partnership contracted with a controlled corporation for the cutting of other timber owned by the partnership, and by letter of October 4, 1948, extended this cutting contract to include the Forest Service timber. A minimal amount of the Forest Service timber had been cut by the controlled corporation before October 4. The partners reported their income from the cutting of the Forest Service timber as long-term capital gain under section 117(a) or section 117(k)(2). The Commissioner contended that the conditions of section 117(k)(1) were not satisfied. He argued that (1) the partnership was not the owner of the timber because the United States retained title under the timber sale agreement; (2) the partnership had not held the timber for more than six months because the timber sale agreement was not executed by the Forest Service until April 2, 1948, while the related corporation commenced logging prior to October 4, 1948; and (3] the cutting contract between the partnership and the corporation did not constitute a "disposal" because the related corporation merely acted as agent for the partnership.
Adobe PDF (34KB)

Giustina v. United States
267 F. Supp. 40; 67-1 USTC ¶9113; 19 AFTR 2d 1013 (D. Ore. 1967).

The taxpayers were members of a partnership which sold timber to a related corporation under cutting contracts which required the corporation to pay the ad valorem taxes imposed on the partnership's timberland. The corporation was required to pay the taxes whether or not any timber was cut. In practice the partnership paid the taxes and was reimbursed by the corporation. Relying on an earlier case which had held that the cutting contract constituted a disposal of timber with a retained economic interest under section 631(b), the partners treated the reimbursed tax payments as capital gain. The Government contended that the payments were not amounts realized from the disposal of timber, and consequently were taxable as ordinary income.
Adobe PDF (10KB)

Godbold v. Commissioner
82 T.C. 73, Tax Ct. Rep. (CCH) 40,918, (P-H) ¶ 82.7 (1984)

[Capital gains and losses: Timber: Form of contract: Economic interest.]--In 1966, petitioners executed a contract covering a period of 62 years for the sale of timber to a timber cutting company. The agreement provided for quarterly fixed payments to petitioners for the sale of 640 cords of wood per year, with payments to be made whether or not any timber was cut. Petitioners retained title to the timber, paid taxes on it and bore the risk of loss until it was cut. A cord credit account was maintained by the purchaser under which petitioners were credited with a minimum of 640 cords per year and debited as the timber was cut. Petitioners were compensated for any overcut in addition to the fixed annual payments. At the termination of the contract, petitioners were entitled to retain as liquidated damages all payments received whether or not any timber had been cut. From 1966 through 1979, petitioners reported all amounts received under the contract as capital gains. For 1978 and 1979, respondent determined that the payments were taxable as ordinary income. Held, the minimum payments do not qualify for capital gains treatment under section 631(b) because petitioners did not retain an economic interest in the timber. Held, further, payments in excess of the fair market value of the timber on the date the contract was executed are not capital gains under section 1221 but are ordinary income.
Adobe PDF (30KB)