Tuesday, May 21, 2013

Leslie Co. v. Commissioner case brief

Leslie Co. v. Commissioner case brief
539 F.2d 943, 1976 U.S. App. 76-2 U.S. Tax Cas. (CCH) P9553; 38 A.F.T.R.2d (RIA) 5458

CASE SYNOPSIS: Appellant challenged a decision of the United States Tax Court which held that appellee could claim a loss where the fee conveyance aspect of the transaction was a sale entitled to recognition when appellant claimed deficiencies under I.R.C. § 1031 for a like-kind exchange.

FACTS: Appellee entered into an agreement to purchase property. Appellee was to erect a plant and sell the building to another company. At the time of purchase, the other company agreed to lease back the facility to appellee. Appellee reported and deducted a loss on its corporate income tax return for the loss on the sale of the property. Appellant disallowed the claimed loss and alleged that the sale and leaseback transaction was an exchange of like-kind property within the scope of I.R.C. § 1031. Appellee contended that the property was a sale, therefore, the loss was recognized. The court held that the conveyance of the property was a sale and appellee could take a deduction for the loss. Appellee had sold the property unconditionally and leased back for fair value. Further, the property was transferred for money consideration only.

CONCLUSION: The court affirmed the tax court's holding that appellant could not charge deficiencies when appellee claimed a loss on a leaseback because appellant had sold the property unconditionally and leased back for fair value and the property was transferred for money consideration only.

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