# Petition for Writ of Certiorari — J. G. Boswell Co. v. Commissioner > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385601_0473%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1962 - **Citation:** 371 U.S. 860 ## Text IN THE Supreme Court of the United State °® _* ' Parker & Son, Inc., Law Printers, Los Angeles. hone MA. 6-9171. afi : . i ° « / . 7 ad / OK TORER L KM, 1§%)2.- rae ° j No.” ee ed , J. G. Boswetit Com PANT and LF Cr. }OSWELL Ce IMPANY (successor by.merger to Tulare Lake Land Company), | Petitioner, ——— VS. CoMMISSIONER OF INTERNAL. REVENUE, aca | , Ss Respondent. PETITION FOR WRIT OF CERTIORARI. a \ . > * * Mervin D. Witson,: a 621 South Hope Street, 7 Los Angeles 17, Calitornia, Counsel for Petitioner. —_—_—_—— ae i g eas : - PAGE ; Opinions tees oe oy ieee Cape A TEN! TAOS GN . Grounds-uyen which jurisdiction of this court is inveked..:.... 2. ‘Dveniae pre-ented for* review... “ae lianas a yrotee Statutes and regulations inyolved........ soncentptenlinigiabetes oy Ra Ack : Statement of the ATE 7 of Appeals for gfe Ninth Circuit.....:.....:.. 10 Reasons for granting the writ... . il *1.. The Circuit Court of Appeals has rendered a decision in conflict with applicabl€ decisions of this court.......... IL 2 a Circuit Court of Appeals below has rendered a | decision ‘in_conflict_-with-the decisions of other Circuit neta tS Courts of. Appeal on the same matter ....0....-...ssseceessse 13 i 3. The court below in holding that this cofirt’s decision in : Hort v. Commissioner, 313 U. S. 28, “is controlling, _ reached a decision in conflict with statutory provisions . and .in conflict with the decision of this gourt in Roa: Hort. case itself......... 14 | Conclusion eecaeeees Appendix : - “|. Opinion of - the United States Court of Appeals for the Ninth A. prcvihenniancipeianissinmietbaeds feoncebnn App. p. \l Judgment © apa , ‘SUBJECT INDEX. Py 4 ‘Jurisdiction of BE and the United States Court ARABLE OF MI ( THORITIES CITED — ’ a - CASES * a . PAGE, Vicon : Association, Ine’ v.. | hited) States 239 F. x 260... 14 Bonwit Tele + & Co. v. Commissioner, 53°F. 2d 381, cert. den, Wt USS. of) clara AA fay a Saints OY: Saueeen +... 16 fF 3 - Farmer's Appeal. ie. 2. Al., ee a Sele Seay 15 Fartiers and Merchants ‘Bank of coahaale: 59 F.2d 912... 18. Ferguson v. Commissioner, 59 F. 2d 893.,... Pika irrarer key | ke Helvering’v: Owens, WEL. S. 468........ EON, Ube ed Ph, 7S Hort v. Commissioner, 313 U.S. 28.20 cscceectetecceeee a, 15).16->- Josey v, Commissioner, 10% Fy 24 453. ec cneinnagituetie P11 er Maasé, v. Higgitis, M2 U. 8. H3 ae sa esite ee ascciinks on eee . | Moore, Mary Younig:-207- Fed. 265, cert. den, 347.U. $942 16° " Pollack v. Farmers'I Loan and Trust Company, 157 U. S. 429-11 : ss Portinoutht Harbor Jand anid. Hotel Company. United. | | States, 200 U. S. 327. sadldbianle itisndectentelaellatg eecselanaaigiains “UU Pumpelly v: ase Fs and Mississippi Canal Company, 13 Wall, (U.S. 166) 20 L. Ed. 57. senestapeverenecsvepereneee Ae Raytheon I PO SIRE v — Commissioner ,. 1H F: 2d- 110 hres ceubakased PN al el CN Pr NETS Sere coenee : 18 Shearer v. Anderson, 16 F. 2d eee: urpemeemanan cree eee 14 . Enited States v. Causby;3328 U.S. 250. cseciocententaeene 13 ; -United States v. Grizaard, 219_U, s. 180... PRA 12. ‘ United States v. Lynah, 188 -U. S. 445...... askew 13 “United States vo Welch,’ 217 U.S: 333... Sa ON Vinited States y. W hite Dental Manufacturing Corhpany, 274 i ie he ee. Wem eres actsndan a Rie Wena t-sebuatiendeorng «Te Warren Sted Corp. vy. Commissioner, 110 F. 34 ational 17 ? ° . f : ait 3 3 . ay REGVLATIONS ~ lice) ae Kegitlation M1, Sec, 1165-7... é. ; Regzlation 111, Sec. 1.4G5-F66} i cccaccccscuex™ oocoesisi ccomenig. : co oe Regulation ILI, Sec. 29.23(€) i) - ats ceenenets:sennnanneese th | Regulation Hd, See. 27.23(€) (3) Ae | cetieetet CA Mae FAS. Regulation 11, Sec. 20.23(£) (V)cevccccnsceensscutnesutugheses’ . STATUTES. Soles “+ “Tnternal Reyenue | Conle.of 1939, Sec | eee somes Re ; Internal _Revertiie Code of 1939, Sec..23(k).Loenriopimnin. 16, mata Internat Revenue Code of 1939, a | | a ee Cen 16 Internal Revenue Code of 1939, Sec. 72 7 Internal Kevenué Code of 1939, 6, 19 Internal Revenue Code, Sec.” 62 ea _ 10 | Perks Code, ‘See. 442 fella logeuldanaeicaci e lt aetianinacacceidcbae 10 Nsw : et ae aay ape te ieee A INTHE , _Saprene Court of he United States | : Gennes. TERM, 1092. | ea : « ’ J. : Boswett Com PANY an@ J. G. Postnas Cour PANY me successor by merger to Tulare Lake Land Company }, 5 A vee 3 CoMMISSIONER OF INTERNAL REVENUE, Petitioner, Respondent. 3 ‘PETITION FOR WRIT OF CERTIORARI. ‘ } . i Pumping of the flood waters off some, of the parcels owned by the two companies was completed February. 23, 1953. (Appendix, p. 4.) * Pumping of the waters off the other areas owned by | ‘both companies was completed by September ib, 1993. { ( Appendix, p. 3.) The values and rental values of the lands prior to the gs a j a o . . .* : . - 8 flood were high. [Tr. 56, 293.1 Petitioners received i 7 7 ‘\ a J ‘ > No insurance or other type of compensation tor damages trom this Houd.. {Tr. St. The United Sites Circuit Court of Appeals did not find-which date was‘“immiediately after the flood", nor the value of the lands “immediately after the flood”. ( Appendix. j i "ee Both the Tax ¢ a the United States Circuit Court of Appeals found that.a Toss from the flood, if any, was clearly “that of petitioner” and that “the flood constituted an identifiable event fixing the onset of the alleged damage, 1 any”. | (.\ppendix, p. 3.) These findings left for determination’ the other ele- ments of- loss which the Tax Court and’ the ‘Circuit Court of Appeals found were elements necessary to a “loss. These were as follows: . i —— RE sthean actual loss. ge 2. -The loss must be evidenced’ by a closed and com- pleted transactic m. ‘and : 3. The loss- must be ssaeiailogd in the year claimed as a deduction. (Appendix p. 3.) Both the Tax Court and the Circuit Court of Appeals - found agaitist the petitioner -on ‘the first twa of these three elements, and .by implication, onthe third ele- ment. ( Appendix, pp. 68.). In the Tax Court and in the Court of Appeals, the taxpayer ee four ‘types of losses which are. set out on _page’2 of the Apperidix. In this Court the pe- titioner claims only the first type: namely, that it liad / —10- ; a -loss of cajital, as it would. lose the use of its land for a. period %t tine —th ut is. als long “us the land ", & niained. ander water. ~ ; 4 . ; Petitioner claimed gs Tax Court and -in. th. Cirguit Court of Appeals, afd claims in this Court that — petitioner's inability te use its tarning lands because of the water standing there on, constituted a tinal and. nenreceverable and nourevsg sible impairment to the value of the land w hich entitled petitioner to a dedue- 3 - tion for loss oF present capital. Both the Tax Court and the Court of Appeals held. that this was not a loss of present capital caused by. a’ . Casualty but was mercly a. prospective loss of potential income. Both-Courts alse then went on to say that the prospective loss—of use was’ too temporary to’ be con- ~“Sidere ‘d a. closed transaction or a loss of present capital ; which were prerevptisites to a deductible loss. : —~f - _ Petitioner maintains that the duration of the loss of use afiected the amount of the damage or shrinkage. win the .walue of the. land wily, and not the critical quies- on of whether there Was a. closed transactiun—a loss 1 present capital, 5 pea GEN erage 7 Jurisdiction of the Tax Court and the United States he Court of Appeals for the Ninth Circuit. oer. This case came betore the ¢ Circuit Court of Appeals under the provisions of Section 7482 of- the Internal Revenue’ Code on a petition fot review of a decision and Grder of the Tax. Court of the United States which ~ took’ jurisdiction under the: provisions of Section 7442 wry gad 3( A) of the Internal i enue Code. pore REASONS. FOR. GRANTING THE WRIT. ° “1. The Circuit Court of Appeals Has Rendered a ~ Decision in Conflict With atmunea: Decisions of This Court. “The - Circuit Court ‘of Appeals in the instant’ ease held, that the impairment of the roture use of the ~ “” Be , ° « : * £ property by a casualty did hot-eause-a present loss of capital and was not a ch ised and ‘completed transaction, © ——-— . ee That principle contlicts: with decisions of this “In the tolfowit if tax—east’s this Court held that in- i the use’ of property, which did not completely de stroy the property, constituted closed ‘and juries ‘to pre iperty completed transactions, and losses of present capital: United States v. White Dental Manufac turing Com- — « pany, 274'U. S. 398% (where the use of the property was Jost by seizure, by ahe German Government in the ~ First World War but was recovered two years later): Helvering v. Owens, 305 U.S. 408 (where a car was merely damaged in the aftuount of $35 by a collision). — / The decision of the court below that the flood did, not cause a loss of present capital is contrary “to many decisions and contrary to principles of law’ heretc Joré _, propotinded by this Court. Tn Pollack v. Farmers Loan” and Trust Company, 157 U. S. 409, this Court’ on page 693. said: as peg ) “It must be conceded that w hinbyer ai ieets any element that gives an article its valiie, in ‘the eye ofthe law, affects the article itself.” This principle: has been recognized .by this Court in > several non-tax cases of injury, te the use of property. . For example, in Pumpelly v. Greenbay. and’ pptanienipps Canal:Company, 13 Wall. (U. 5. 166, 20 L. Ed. 377), this Court held that the government, had ° “condemned” (00 acres ‘of farming land and must pay the property owner for it, when it erected a dam across the: Fox River. which was an outlet of Lake Winnebayo, by ‘which the water of the lake -was raised so high as to flood the land-and-to do the damage complained—of. This Court held that the water standing on the land al- “Most completely destroyed the value ot the land.” This Court at page 1X1 said: At remains true that webs real estate is actually invagg! by superisRluced additions of wa- tes. earth, sand or other materjal, or by havi ing any artificial structure placed on it, so ‘as to - ef- fectually destroy or impair its usetulness, it is a taking, within the meaning of the Constitution, and ‘that this proposaion is not in conflict with the_ weight of judicial authority in this Country, and certainly not with sound principle.” Also, on page 179, this Court: said: “But there are numerous authofities to sustain the doctrine that a-serigus- interruption to the. cym- mon atid necessary use of property may be, in the. language of Mr. Angell in his work on water- " COUTSgs, equivalent to the taking of it, and that “s under the Cc curstitutic mal provisions it ‘is not neces- sary that the land should be absolutely taken.” Similar cases’ ‘involving flooding of land are United - _ States v. Welch, 217 Oe S 333 (1910): United States v. Grissard, 219 U. “180, 41911); United States: @. Lynah, 188 U.S. 445 | ae “- ; —13— In United States v. Lynah, supra, on page 470, this ° Court said : “While the govertiment dues not directly’ pro- ceed to appropriate the title, yet it takes away the use and value: when that is done it is of little , consequence in whom the fee may be vested.” In more recent nontax cases not involving 1 tlooding but otherwise involving injury to the use of dand, this Court hetd that the government had “taken” property and was required to pay ‘tor it. ~ See United State Causby, 328.U. 5. 256, where a; government flew air- ‘craft over land, which destroyed its use; Portsmouth Harbor Land and Hotel Company v. U. S., 260 VU. S. 327 where the government fired guns over the land which destroyed its use. . In holding that there was no present loss of capital caused by the flood the court below reached. a de- cision in conflict with the above- mentionéd nofitax deci- _. sions of this Court; namely, that injury to the use of the ~~ y property is a partial destruction of the capital ‘in ‘the | property itself. In reaching the decision that there was not a-closed and completed transaction caused py the flood the court below has reached a decision in conflict © with the decisions of.this Court in tax cases that a“ casualty doitig an’ injury to. property ‘or? the use of property. is a closed and. completed transaction. 2. The Circuit Court of Appeals Below Has Ren- - dered a Decision in Conflict With the Decisions of. Other Circuit Courts of Appeal P o Se ° the process-of washing the salt deposits below the rowt The levees were breached in the spring ot 1952, and water. Pumping ot the tlood waters off * of the par- cels was completed as early as I ‘ebruary 23, 1953. By September 22, 1953, all of the remaining sit had been pumped dry. The action of the flood- waters caused breaks 1 in the lev ees, Washed the soil around, and: deposited silt in the "drainage and irriggatic m ditches. The land*was left in an uneven and rough condition. To rectify the damage done by the flood the petitioner was required to repair and level the land, rebuild the” levees, and clean out the silt leposited in drainage and irrigation ditches.. The-costs of making’ such repairs were dedficted on the. petitioner's returns in the years 4neurred as ordinary and necessary business expenses. Ns soon as the land was de-watered. and repaired, the ‘. soil was prepared for farming, crops were planted, and ‘normal operat moot the farms/was resumed. The cozt- - of this rehabilitation was also deducted by petitioner as ordinary and necessary _ business expense. Produc- tien on most of the land equaled or, exceeded the pre- flood output. ; The Tax Court found that the Federal Government had imposed cotten’ allotments’ or acreage limitations in’ 1950, and 1954, and the years following. In 1954. the limitation was imposed on-a crop land basis, a system. of computation which has no relationship to. the humber of acres previously planted to cotton. In 1950, and again in 1955, the limitation was imposed on a history basis, a system of computation which is based on the ° number of acres of cotton grown, in the inimediately preceding three years. Thus, in 1955, the petitioner’s cotton altotegent was restricted raat of its lack. of “cotton history” in the yéars.of fhe flood. But in 1951, 1952, and 1953, during the tax years here involved, the: j . z ‘ : } - a . Z ian government did not restrict the growing ot cotton om - petitioner's lands. In denying the petitioner's alleged loss. the Tax Court correctly set forth the requirements tor capital ss de- duction under Section 231 tot ‘the Code as follws: “ (1) There must be an actual loss; “(23 the ‘persan’ claiming the loss must sustain it; °( 3) the loss must He evidenced by a closed and com- - . pleted transaction: (4) the loss must be’ fixed by an identifiable event; and (5)- the Icss must be " sustained in the year claimed as a deducti ms These requirements are based on Regulation 111, $29.23 _(e)-1 of the 1939 Code, which has been in effect. for -many years and has consistently required the elments listed above. Boehm v. Comimissioner, 326 U.S. 287, . 291 (1945). Although this regulation applies to losses _ by individuals, it is also applied to losses by corporations -as provided: by. Regulation 111, §$29.23(f)-1. Since these regulations have been “long continued without ‘substantial change. applying to unamended or substan- tially re-enacted statutes,” they may be deemed to. Rave received congressional approval and ,thuss have the .ef- fect of law. Helvering v. Winmill, 305 Us S. 79, 83 (1938). The pertinent provisions of Regulati m 118, which apply to the taxahle years beginning after Decem- ber 34, ‘a3 are substantially the sante. With regard to these requirements. the Tax Court correctly observed that the facts of this case do not re- quire a consideration of items (2) and (4): The Joss.” if any. was clearly that of the petitioner. And, as noted . below, the flood constituted an identifi able event fixing the onset of the alleged damage. if any. We shall, then, coailiieiad examine the clements vi loss alleged by petitioner in light of the remaining requirements, items (1), (3). and (5). : Petitioner alleges as the first element of ° its bine the fact that, as of June 30, 1952, it would be unable tu use the property for farming as long ‘as it remained under water. This fact, it is contended. constituted an “abse- . jute and final and non-recoverable and non-reversible” impairment to. the value of the land which entitled peti- tioner’to a Capital ldss deduction. In support of this contention petitioner cites a number of cases for the proposition that ° ‘the value of’ property is in the use to which it cati be put.” . See United States v. W hite Den- tal Mig. €o.. 274 U. S. 398 (1926); W. K. Stowers v. United States, 169 Fed. Supp. ae ($ ‘such a conclusion. Here. the basin had a history of periodic flooding. in which normal farming operations were resumed shoftly after the lands had been de- watered. That petitioner had’ the same expectation after this flood is. shown by the fact that it bought parcel’ gf land in 1940, which Was tinder water, at the _ time, of ‘purchase, de-watered the land, and began to _ farm it the foal wing year. we "As of June 30, 1952, petitioner hi id ‘not ‘sold or other Pr ot ‘wise disposed of ‘is interest in the capital asset Here ; involved. What then is the natare of the ke iss Petitioner “\ Claims to have sustained > Tn our View. the substance of petitioner’ s claim is that it would be deprived of the income produced by its” farms during © fhe — presence of-the flood waters on the land. The Tax Court found. and ‘petitioner in fact admits.. that the . presence of the flood waters would be only” temporary. z Such a short-term interruption in the use of the prop- | erty is not in our view ascent us to a loss of the prop- erty itself. te ‘ = ‘ ‘That such‘a clainy cannot be the basis for ‘a Section 23(f) loss deduction is clearly established by Hort vy. Commissioner, 313 U. $. 28 (1941), In Yhat ‘case the Supreme Court set forth the rule that a loss of potential income is not a deductible loss within the meaning. of -” * « & the capital loss provisions. We think the rule of , the si . by this contention.” ° 34 T. (C9539, 545. “the useful-life of the land. for far these experises are now properly claimed as’ a logs. Hort case qo be controlling here, and we are not pér- suaded by petitioner’ s effurts’to distinguish it from the instant case. The policy underlying, the Hort rule may require its application in many fact situations. W here, ; as here, petitioner's claim amburits to nothing “more . than «w temporary. loss of potential incume from the property, no loss deduction can be allowed. Eee Petitioner alleges as the secund element of its loss the physical. injury inflicted upon its land by the flooding* water... ‘The Tax’ Court, however, found that these injur- ies had been repaired and that the land had been reha- _ bilitated’ for farming. use. It found’ that the out-ot- _ pocket costs. incurred to’ make | these repairs were de- ducted by petitioner as ordinary and necessary business expenses. - These deductions were stipulated by the par- ties, to have been properly deducted. By now claiming these expenses as a loss, petitioner secks to reinforce its allegations as to the other, more speculative, elements of loss sustained. We agree with the Tax Court's conclu- sion that “petitiongr's claim for-the loss is not advancec Petitioner argues further, however, that it ave hold . the Commissioner may invoke the felief “provisions f mt a decision were made. But the availability of this re- | lief does not serve to support the merits of /etitioner’ s claim that’ such expenses should: 1 now be /regarded as capital loss. Petitioner alleges as the third elemeny/ii loss. the addi- tion of salts to the soil. which, it isflaimed. shortened ing purposes. The ‘ . Tax Cout tound this contention to, be without merit. We thiykk that substantial ry idence’ exists in the record - rst, petitioner did ligt present any evidencé to _ > actual ameunt oi “salt added to the s sil by the 1952 lood. THe only evidence on. this note shis an in-’ crease in the salt concentration on one [partic ulat parcel between the years 1948 and 195%. Such data provides the trier of. fa ct with no reliable. inference as to the salt .\crease brought about by thy 1952° flood. As the Tax Court pointed out, any) Hoods and irrigé- tion waters, both before and after the 1952 thowd have also added salt, deposits to the soif. ‘ Second, petitioner also contefds that the salt. de- posits added by. the’ 1952 floor damage to its land. This it’ the opinion below, constituted pernjanent urged, is supported by - ' gt We think that a caretul / opinion indicates just t conchides’ that increas flood would not, per / land. 34 YT. C. 539,249. In support of this. conclusion the Tax Court relies upon the fact that modern farming techniques ty control cading of the Tax Court’ s contrary. The Court below the salt content of ‘the soil -have been successfully used on the farms in-this basin. In dact-many areas “formerly unuseable have been sO treated by these meth- ods and are new- successfully farmed. Such techniques F were used by the petitioner in this case to the end that the land was Ghortly returned to farming use ard has produced as’ much or more than betog: the 1952 flood. We note that the costs incurred in rehabilitating the soil frony these salt deposits are generally deductible salt deposits from the 1952. . shorten the ‘usetul life of the- ’ a a —10— i ‘ ex : ° as dindiey aad necessary business expenses, and were so leducted by the petitioner r aiter.the 1952 flood. ‘On the Basis of dhese: tacts the Tax Court conclated: that’ a claim ot permanent damage to the useful . lite of the land was tuo sess to justify a capital loss déduction in the taxable years in question. ‘We agree. Petitioner has rec eived the benefit of a .tax ‘deduction for the out-of-pocket. expenses incurred to return the land. te productive use. The alleged capital loss was ” "properly disallowed. ome, ee | eed Pétitioner alleges as the fourth element of ee the. reduction in. the ° ‘cotton history’ caused by its inability to grow cotton while flood waters stood on the/ land. In our. view this contention is also without merit. For ‘the taxable years in -question- this claim is at best,. - speculative. Petitioner's ‘claim of loss rests on: the assumption ‘that the vovernm ent. will, impose, in the years im- + ~ mediately after the flood, the same type of crop limita- -tion as it has in the past: .- That this assumption can- not support a claim for a Section 23(f) loss deduc- tion is made clear by’ - rule in Lucas v. American Code Company, 28 .U. S. 445 (1829). That case re- quires. that where the loss has not been realized by sale or other disposition, it must’ be ‘ ‘reasonably certain in fact and ascertainable in amount” to be deductible as . acapital loss, . ; Neither of these tests is met in this case. The speculative’ nature of the Gaim | is made clear by the fact . A < - ‘er “ that: crop limitations on a “cotton history” basis were imposed in 1950 and not again until 1955. Also by the fact that ahe limitations imp sed in 1954-had no_rela- tion to the history of cotton grown-.on the land. In other words, as of the taxable years, in questign, pe- titigner Was not reasonably certain in fact. either when the growth of cotton would again be restricted or it the history of cotton grown would be a basis for that re- striction. “The year in which such controls were again imposed would also have an etfect upon the amount of the loss to be claimed, a ‘factor which petitioner failed to consider. Such” speculation cannot, in our, view, be the basis’ for a Section 23 (f) eapital loss ‘deduction. In view of our determination of this claim we do not reach the question (not raised on brict ) as to whether a “cotton history”, is an elemerit. of property which can come within the capital loss provisions in a year: WwW hen suclea cryp restriction is in Tact imposed. Having thus concluded that cach of the elements of loss alleged by petitioner is not properly the basis of a Section 23 (f) capital loss deduction, the deficiencies, asserted by the Commissioner must be sustained. The decision of the Tax Court As at firmed. _ (Endorsed) Opinion I iled April 17. 1962. +. + Frank FH. Sc hid. ( ‘le rk. nf 2— Judgment. : , : - ™ all : ° ea . United States Court of Appeals for the: Ninth Cir- cult. - | : J. G. Boswell C ompany and J. G. Boswell! Com- pany (Successor by merger: to - Tulare ons Land Com- - pany) Petitioner VS. Commissioner of Internal Reventie, Respondent. . Upon Petition to Review a Decision of The Tax Court of the United States. aa This Cause came on to be‘heard on the Transcript of the Record from The Tax Court of the United States, and was duly submitted. Ce C onsideration Whereof, it is now here ordered and adjudged by this Court, that the 0.2.0.0... Deci- sion of the said Tax Court of the United States in this Cause be, and hereby is af firmied. nce - _ Filed and entered April 17, 1962. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385601_0473%3A2. Public record. Not legal advice.