Hugo Brand Tannery, Inc. v. Commissioner

U.S. Tax Court

Hugo Brand Tannery, Inc. v. Commissioner

20 T.C. 990, 1953 U.S. Tax Ct. LEXIS 67

CourtUnited States Tax Court

DecidedSeptember 16, 1953

DocketDocket No. 27351

StatusPublished

Cited by6 cases

This text of 20 T.C. 990 (Hugo Brand Tannery, Inc. v. Commissioner) is published on Counsel Stack Legal Research, covering United States Tax Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

Hugo Brand Tannery, Inc. v. Commissioner, 20 T.C. 990, 1953 U.S. Tax Ct. LEXIS 67 (tax 1953).

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Opinion

OPINION.

Opper, Judge:

There appears to be no quarrel as to petitioner’s qualification for relief under section 722 (b) (4). Indeed, literal conformity to the requirements of that section could scarcely be more evident. Petitioner officially commenced business within the “base period,” on October 5,1939, to be precise, and so near to its close that despite respondent’s efforts, it seems difficult to deny that with an income of but $434.54 it had not reached its normal earning capacity by the end of its last base period year.¹

It is rather the size of the reconstructed income, and its relationship to an invested capital credit, to which petitioner was permitted to resort under section 714 in filing its returns, that constitutes the real issue. Only if its income credit under the reconstruction will be of greater benefit than the credit it thus automatically acquires can there be relief under section 722. Green Spring Dairy, Inc., 18 T. C. 217; Block One Thirty-Nine, Inc., 17 T. C. 1364.

In weighing the various factors involved, we have, as our ultimate finding of fact, arrived at a constructive average base period net income which grants petitioner some relief but not in anything like the size claimed by it. We regard respondent’s estimates as too low. The goatskin market during the base period might have been increased had petitioner’s cheaper, more flexible, and more speedily procurable product been available. But without looking to actual events subsequent to 1939, see Southern California Edison Co., 19 T. C. 935; Del Mar Turf Club, 16 T. C. 749, only approximations are possible as to the time and extent of petitioner’s success with its experimentation on its new tannery processes, as to the scope and enthusiasm of any promotion campaign conducted on behalf of its products, and possibly as to the costs, both direct and indirect, of its operations.

Under the 2-year anticipation of the “push-back” rule,² all these and other material factors must be considered.against an economic background very different from the wartime activity existing during the actual events. The figure we have found is the best we have been able to arrive at, taking into account all relevant elements. See Fishbeck Awning Co., 19 T. C. 773; Radio Shack Corporation, 19 T. C. 756; National Grinding Wheel Co., 8 T. C. 1278.

Reviewed by the Special Division.

Decision will be entered wider Rule 50.

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OPINION.

Opper, Judge:

There appears to be no quarrel as to petitioner’s qualification for relief under section 722 (b) (4). Indeed, literal conformity to the requirements of that section could scarcely be more evident. Petitioner officially commenced business within the “base period,” on October 5,1939, to be precise, and so near to its close that despite respondent’s efforts, it seems difficult to deny that with an income of but $434.54 it had not reached its normal earning capacity by the end of its last base period year.¹

It is rather the size of the reconstructed income, and its relationship to an invested capital credit, to which petitioner was permitted to resort under section 714 in filing its returns, that constitutes the real issue. Only if its income credit under the reconstruction will be of greater benefit than the credit it thus automatically acquires can there be relief under section 722. Green Spring Dairy, Inc., 18 T. C. 217; Block One Thirty-Nine, Inc., 17 T. C. 1364.

In weighing the various factors involved, we have, as our ultimate finding of fact, arrived at a constructive average base period net income which grants petitioner some relief but not in anything like the size claimed by it. We regard respondent’s estimates as too low. The goatskin market during the base period might have been increased had petitioner’s cheaper, more flexible, and more speedily procurable product been available. But without looking to actual events subsequent to 1939, see Southern California Edison Co., 19 T. C. 935; Del Mar Turf Club, 16 T. C. 749, only approximations are possible as to the time and extent of petitioner’s success with its experimentation on its new tannery processes, as to the scope and enthusiasm of any promotion campaign conducted on behalf of its products, and possibly as to the costs, both direct and indirect, of its operations.

Under the 2-year anticipation of the “push-back” rule,² all these and other material factors must be considered.against an economic background very different from the wartime activity existing during the actual events. The figure we have found is the best we have been able to arrive at, taking into account all relevant elements. See Fishbeck Awning Co., 19 T. C. 773; Radio Shack Corporation, 19 T. C. 756; National Grinding Wheel Co., 8 T. C. 1278.

Reviewed by the Special Division.

Decision will be entered wider Rule 50.

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20 T.C. 990, 1953 U.S. Tax Ct. LEXIS 67, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hugo-brand-tannery-inc-v-commissioner-tax-1953.

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