Citations
- 241 F. Supp. 195
Full opinion text
CONNELL, Chief Judge.
This is an action for a refund of an alleged over-payment of Federal income taxes for the fiscal year ending August 31, 1959. The controversy between the taxpayer and the Government arose over the tax implications of the transfer of the plaintiff’s Chemurgy Division to Central Soya Company on September 1, 1958. The exhibits attached to the complaint (all of which the defendant admits to be authentic), together with other admissions in the defendant’s answer, clearly show that the following facts are not in. dispute. The plaintiff in its original corporate tax return for the fiscal year ending August 31, 1959, reported the transaction between itself and Central! Soya as a lease with an option to purchase and reported the income from the transaction as rental income. After an audit by the Internal Revenue Service, it was determined by the Government that the transaction was a sale consummated in the fiscal year ending in 1959, and proposed a deficiency in the amount of $277,455. (Cf. 30-day letter, Ex. 1). The plaintiff thereafter attempted to file an amended return for the year in question, admitting that the transaction was a sale, but electing to report its gain on the installment basis as provided by Section 453 of the Internal Revenue Code of 1954. The Government then issued a notice of deficiency, determining that the transaction was a sale but refusing to permit the use of the installment method because the election to do so had not been made in the plaintiff’s original return. A deficiency was accordingly asserted in the amount of $277,455.00. (Cf. 90-day letter, Ex. 2). On May 31, 1963 the plaintiff paid the full amount of the deficiency, together with interest in the amount of $58,676.03, a total of $336,-131.03. (Cf. Para. 13 of defendant’s answer.) The plaintiff then brought this action to recover the assessment.
The apparent basis for the Government’s earlier resistance to the plaintiff’s attempted election to report the sale under the installment method is the contention that the election was not timely. The statute under which the taxpayer purported to act, 26 U.S.C.A. § 453, reads:
“(a) Dealers in personal property. — Under regulations prescribed by the Secretary or his delegate, a person who regularly sells or otherwise disposes of personal property on the installment plan may return as income therefrom in any taxable year that proportion of the installment payments actually received in that year which the gross profit, realized or to be realized when payment is completed, bears to the total contract price.
“(b) * * *
“(1) General rule. — Income from—
“(A) * * *
“