The CLIFTON INVESTMENT COMPANY,
The CLIFTON INVESTMENT COMPANY,
Petitioner,
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent.
Docket No. 14738
Date of Decision: February 6, 1963
Judge: BOYD, Opinion MILLER, Concurrence
Tax Analysts Citation: 95 TNT 38-71
Principal Code Reference: Section 1033
Summary
PROCEEDS FROM SALE OF OFFICE BUILDING USED TO PURCHASE HOTEL TAXED, BUT FOURTH CIRCUIT REJECTS TAX COURT'S 'END-USE' TEST.
The Clifton Investment Co., a real estate investment
corporation, sold, under threat of condemnation, the United Bank Building,
which was in Cincinnati and produced rental income from commercial tenants.
The funds from the sale were used to purchase 80 percent of the shares of a
company whose sole asset was a contract to purchase a hotel in New York
City. The hotel was later purchased.
Clifton claimed that the purchase of the stock was an investment
in property "similar or related in service or use" to the office building
it had sold, qualifying the company for the nonrecognition provisions in
section 1033. The IRS and the Tax Court, applying a test that examined the
end use to which the properties were put, disagreed.
The Sixth Circuit affirmed, holding that the purchase of the
transaction did not qualify for nonrecognition of gain. After rejecting the
Tax Court's "end-use" test, the court stated that, to qualify under section
1033, the properties must have been reasonably similar in relation to the
taxpayer. Relevant considerations, wrote Circuit Judge Boyd, are the extent
and type of the lessor's management activity and the amount and kind of
services rendered by him to the tenants.
In this case, while both properties produced rental income, the
taxpayer managed the office building by itself but secured a professional
manager for the hotel. The office building required only two employees; the
hotel had 140 employees and provided a host of services to the tenants that
were not supplied at the other structure. There were no limitations on the
types of tenants in the office building, while the commercial tenants in
the hotel were selected according to how they would fit in with the overall
operation. The appeals court concluded that what was received from the
properties, as well as what was demanded of the taxpayer, must be
considered in determining whether the properties were similar or related in
service or use.
Judge Miller concurred in the result but argued that the
investment character of the properties should have been given more weight,
especially because the statute was intended to protect persons whose
property was being condemned.
................
................
In order to avoid copyright disputes, this page is only a partial summary.
To fulfill the demand for quickly locating and searching documents.
It is intelligent file search solution for home and business.
Related searches
- closed end investment company shares
- closed end investment company definition
- closed end investment company examples
- personal investment company pic
- blackrock investment company history
- open end investment company definition
- investment company financial statements 2019
- best investment company for beginners
- personal investment company definition
- best investment company for ira
- 2019 investment company fact book
- american funds investment company of america