Commissioner of Internal Revenue v. George W. Offutt, Iii, and Jane P. Offutt, and Pimmit Development Corporation

HAYNSWORTH, Circuit Judge:

A land development company in Virginia installed water and sewer facilities which, upon completion, it transferred to a utility company holding franchises to supply such services in the area. The only consideration for the transfer was the utility’s covenant to operate them and to supply adequate water and sewer services to lot purchasers. The utility corporation was wholly owned by an individual, who also owned forty per cent of the stock of the land development company. Under those circumstances, the Commissioner contended that the development company impropex'ly…