Sconset Oil Co. v. Commissioner

Board of Tax Appeals

Sconset Oil Co. v. Commissioner

26 B.T.A. 419, 1932 BTA LEXIS 1307

United States Board of Tax Appeals·Decided June 15, 1932·No. Docket No. 40527.·Published·Cited by 3 cases

Opinion

[420]*420OPINION.

Lansdon:

The only controversy in this proceeding relates to the basis for computing profit from the sale of assets acquired by the petitioner from an individual in exchange for all of its capital stock. The respondent has determined that the basis is to be determined under section 204 (a) (8) of the Revenue Act of 1926 and that it is cost of the property to the transferor. The petitioner contends that the basis is cost of the assets, which is the fair market value of the stock paid therefor.

Section 204 (a) (8) of the Revenue Act of 1926 ¹ provides that where property is acquired by a corporation for stock in connection with a transaction described in paragraph (4) of subsection (b) of section 203² the basis for computing profit or loss shall be the same as it would have been in the hands of the transferor. We have held repeatedly that section 204 (a) (8) is applicable to a situation such as that presented here. Perthur Holding Co., 23 B. T. A. 1128; Paradox Land & Transport Co., 23 B. T. A. 1228; Burlington Gazette Co., 21 B. T. A. 156; and Haas Building Co., 22 B. T. A. 528. Upon authority of the above decisions the respondent’s determination is approved.

The petitioner alleges that section 204 (a) (8) of the Revenue Act of 1926 is unconstitutional as violating the Fifth Amendment. The similar section of the Revenue Act of 1924 has been before the Federal courts on at least two occasions and its constitutionality has been upheld. Newman, Launders & Co. v. United States, 68 Ct. Cls. 641; 36 Fed. (2d) 1009; certiorari denied, 281 U. S. 760; and Osburn California Corporation v. Welch, 39 Fed. (2d) 41; certiorari denied, 282 U. S. 850. Upon authority of those decisisons we uphold the validity of the section questioned.

Decision will be entered for the respondent.

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[420]*420OPINION.

Lansdon:

The only controversy in this proceeding relates to the basis for computing profit from the sale of assets acquired by the petitioner from an individual in exchange for all of its capital stock. The respondent has determined that the basis is to be determined under section 204 (a) (8) of the Revenue Act of 1926 and that it is cost of the property to the transferor. The petitioner contends that the basis is cost of the assets, which is the fair market value of the stock paid therefor.

Section 204 (a) (8) of the Revenue Act of 1926 ¹ provides that where property is acquired by a corporation for stock in connection with a transaction described in paragraph (4) of subsection (b) of section 203² the basis for computing profit or loss shall be the same as it would have been in the hands of the transferor. We have held repeatedly that section 204 (a) (8) is applicable to a situation such as that presented here. Perthur Holding Co., 23 B. T. A. 1128; Paradox Land & Transport Co., 23 B. T. A. 1228; Burlington Gazette Co., 21 B. T. A. 156; and Haas Building Co., 22 B. T. A. 528. Upon authority of the above decisions the respondent’s determination is approved.

The petitioner alleges that section 204 (a) (8) of the Revenue Act of 1926 is unconstitutional as violating the Fifth Amendment. The similar section of the Revenue Act of 1924 has been before the Federal courts on at least two occasions and its constitutionality has been upheld. Newman, Launders & Co. v. United States, 68 Ct. Cls. 641; 36 Fed. (2d) 1009; certiorari denied, 281 U. S. 760; and Osburn California Corporation v. Welch, 39 Fed. (2d) 41; certiorari denied, 282 U. S. 850. Upon authority of those decisisons we uphold the validity of the section questioned.

Decision will be entered for the respondent.

Sconset Oil Co. v. Commissioner, 26 B.T.A. 419, 1932 BTA LEXIS 1307 (bta 1932).

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Opinion

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