Santa Anita Consol., Inc. v. Commissioner
United States Tax Court
In 1957, LATC and CBS organized a corporation (POP) to construct and operate an amusement park, investing $ 1,800,000 in stock and guaranteeing a line of credit of $ 8,750,000. In 1959, LATC transferred its POP stock and $ 4,396,000 to Pacific, an unrelated corporation, and received a release of its liability as guarantor.
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In 1957, LATC and CBS organized a corporation (POP) to construct and operate an amusement park, investing $ 1,800,000 in stock and guaranteeing a line of credit of $ 8,750,000. In 1959, LATC transferred its POP stock and $ 4,396,000 to Pacific, an unrelated corporation, and received a release of its liability as guarantor. Held, LATC incurred an ordinary loss in 1959, deductible under sec. 165(a), I.R.C. 1954, of $ 4,396,000 on payment for its release from the guaranty obligation; held, further, LATC incurred a capital loss of $ 900,000 on the transfer of its POP stock to Pacific.
1Opinion of the Court
Feati-ierston, Judge:
Respondent determined deficiencies in petitioner’s Federal corporate income tax as follows:
TV Tú Ool. SI— Amount
1956_ $700, 575. 38
1958_ 207. 99
1959- 1, 586, 790.02
Certain issues have been conceded by the parties. The questions remaining for decision are: (1) Whether petitioner is entitled to a deduction for a loss in the year 1959 resulting from its payment of $4,396,000 in connection with the transfer of its interest in Pacific Ocean Park, Inc., to Pacific Seaboard Land Co. and, if so, whether the loss is an ordinary loss or a capital loss; (2) whether petitioner…
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