Rojas v. Commissioner
United States Tax Court
D and E are the transferees and former majority shareholders of S, a corporation that had been engaged in the business of farming row crops. S adopted a plan of complete liquidation and pursuant to that plan, distributed to its majority shareholders all its operating assets, including certain harvested and unharvested crops.
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D and E are the transferees and former majority shareholders of S, a corporation that had been engaged in the business of farming row crops. S adopted a plan of complete liquidation and pursuant to that plan, distributed to its majority shareholders all its operating assets, including certain harvested and unharvested crops. Prior to the liquidation, S had deducted, pursuant to sec. 162(a), I.R.C. 1954, expenses incurred in connection with the cost of cultivating these crops. Held, the tax-benefit rule does not require S to include in income the expenses deducted for materials and services…
1DissentNims, J.
By its action in this case the majority reopens a loophole which the Supreme Court thought it had closed in Hillsboro National Bank v. Commissioner and United States v. Bliss Dairy, Inc., 460 U.S. 370 (1983). This arises through the combination of allowance of corporate deductions under section 162 for the cost of materials and supplies, plus the step-up in basis of the corporate assets distributed in liquidation by virtue of former section 337 which are thereafter sold by the shareholders at little or no gain. This résult is not only inconsistent with Bliss Dairy; it also conflicts directly…
2Cases cited3 opinions
- Hillsboro National Bank v. CommissionerSupreme Court of the United States · 1983
- Mars, Inc. v. CommissionerUnited States Tax Court · 1987
- Byrd v. CommissionerUnited States Tax Court · 1986