“a deduction for ordinary and necessary business expenses is not the same animal as a deduction allowed for depreciation”
How later courts described this case
- “a deduction for ordinary and necessary business expenses is not the same animal as a deduction allowed for depreciation”
- it is not necessary that the taxpayer actually receive money or property to have income recognition
Written by the judges who cited it.
The opinion
Simpson, J., concurring: Although I agree with the Court’s conclusions in this case, I wish to emphasize that there was a “recovery” in this case because the liquidation was of the type described in section 334(b)(2) and was part of a plan for the acquisition of the assets of Service.
Section 334(b)(2) provides that under certain circumstances, the parent corporation’s adjusted basis in the stock of its subsidiary is substituted as the basis of the property received from the subsidiary in a section 332 liquidation. The parent is treated as though it had purchased the subsidiary’s assets instead of its stock. S. Rept. No. 1622, 83d Cong., 2d Sess. 257 (1954); see Kimbell-Diamond Milling Co., 14 T.C. 74, 80 (1950), affd. per curiam 187 F.2d 718 (5th Cir. 1951), cert. denied 342 U.S. 827 (1951). Under such circumstances, I agree that Service “recovered” a deduction previously taken.
By our holding in this case, we are expressing no position concerning the tax consequences when property is distributed in other types of liquidations.