Commissioner of Internal Revenue v. United Contractors, Inc.

344 F.2d 123, 15 A.F.T.R.2d (RIA) 714, 1965 U.S. App. LEXIS 6101

• Court: Court of Appeals for the Fourth Circuit
• Decided: March 29, 1965
• Docket: 9754
• Status: Published

Opinion

PER CURIAM.

This appeal by the Commissioner from a decision by the Tax Court 1 in favor of the respondent, United Contractors, Inc., raises the question of whether a parent corporation’s intercompany profit 2 eliminated in a consolidated income tax return for the taxable period ended September 30, 1951, is realized by the parent corporation and taxable to it as ordinary income upon the sale of the stock of the subsidiary in 1959 to a nonmember of the group.

Petitioner strenuously argues here, as it did before the Tax Court, that a proper interpretation of section 1502 of the Internal Revenue Code of 1954, as amended, and the regulations issued thereunder requires the inclusion in taxpayer’s gross income, in 1959, of the previously eliminated intercompany profit in order clearly to reflect its income and to prevent the profit from escaping taxation. The Tax Court rested its decision in this case on Henry C. Beck Builders, Inc. v. Commissioner, 41 T.C. 616 (1964), a decision by the full court (five members dissenting) in which the material facts and the arguments made by the parties were identical to those in this case.

We have considered-the-able and exhaustive briefs of the parties and the arguments before this court; we find ourselves in agreement with the decision of the Tax Court for the reasons set forth in the opinion for the majority in the Beck case. Therefore the decision of the Tax Court is

Affirmed.

1 . 1964 P-H T.C. Memo. Dec. ¶ 64,068.

2 . The profit was earned by the parent in constructing an apartment building for tbe subsidiary during 1950-1951.