Memorandum for the United States in Opposition — Dobkin v. District of Columbia

Iu the Supreme Court of the United States

OCTOBER TERM, 1964

No. 900

KELLER & GOETZ, INC., PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

SECOND CiRCUIT

MEMORANDUM FOR THE UNITED STATES

IN OPPOSITION

Section 337(a) of the Internal Revenue Code of

1954 provides an excepiion from the rule that a cor-

poration, like any other taxpayer, must recognize the

gain or loss realized on the sale of property. Under

this section, if “a corporation adopts a plan of com-

plete liquidation” ana “within the 12-month period

beginning on the date of the adoption of such plan, ali

of the assets of the corporation are distributed in

complete liquidation * * *,” then “no gain ov loss

(1)

2

shall be recognized to such corporation from the sale

or exchange by it of property within such 12-month

period.”

The question in this case is whether the gain real-

ized by petitioner from the condemnation of its prop-

erty was excluded from income under Secticn 337

(a). The condemnation of property clearly constitutes

a sale for the purposes of Section 337, Hawaiian Gas

Products v. Commissioner, 126 F, 2d 4, 5 (C.A. 9),

certiorari denied, 317 U.S. 653; Wendell v. Commis-

sioner, 326 ¥. 2d 504, 602 (C.A. 2), and it is con-

ceded that petitioner executed a plan of liquidation

within 12 months of the adoption of the plan. The

issue here is whether the sale by condemnation of pe-

titioner’s property took place after the adoption of

the plan, so as to exempt the gain under Section 337

(a), or whether the condemnation sale took place

before adoption of the plan, so as not to qualify for

the exemption under Section 337(a).

Revenue Ruling 59-108, 1959-1 Cum. Bull. 72, 74,

holds that the time at which a condemnation sale

takes place is to be decided on an examination of the

particular condemnation statute, and that—

The obligation of the condemning authority

should therefore be treated as fixed upon any

such taking which transfers the title to the prop-

erty and creates an immediate obligaticn upon

the condemning authority to pay just compensa-

tion, even though the amount of the compensa-

tion remains to be determined and paid at a later

date.

3 i

The New York statute applicable to this case (24

McKinney’s Consolidated Laws of New York Anno-

tated, Section 30) provides that “appropriation by the

state * * * snall be deerned complete and the title to

such property shall be vested in the people of the state

of New York” when a description of the property and a

map are filed by the superintendent of public works

in the office of the county clerk 01 register where tye

property is located (Pet. App. 13). Since the

map and descrivtion were filed in this case

before the plan of liquidation was _ adopted,

the condemnation sale did not come _ within

Section 337(a). The Court of Appeals for the Sec-

ond Circuit and the Tax Court have reached this con-

clusion in this and similar cases. Wendell v. Commis-

sioner, 326 F. 2d 600 (C.A. 2); Dwight v. United

States, 328 F. 2d 973 (C.A. 2); Driscoll Bros. & Co. v.

United States, 221 F. Supp. 603 (N.D. N.Y.), appeal

to the Second Circuit dismissed by taxpayer, April 21,

1964; 84 Woodbine Street Realty Corp. v. Commis-

sioner, decided by the Tax Court, September 26, 1963

(P-H Memo T.C., par. 63,262), appeal to the Second

Circuit dismissed by the taxpayer, March 20, 1964.

See also Commissioner v. Kieselbach, 127 F. 2d 359

(C.A. 3), affirmed as to another issue, 317 J.S. 399,

where the court held that for the purposes of com-

puting the holding period of a capital asset the owner

ceased to held it at the date of the order vesting title

in the condemni::g authority.

There is no conflict. Henderson v. United States

(W.D. Wash.), decided October 5, 1964 (64-2 USS.

T.C., par. 9799), and Towanda Textiles, Inc. v. United

4

States, 180 F. Supp. 373 (Ct. Cl.), cited by the peti-

tioner, both related to involuntary conversions taking

place within 12 months after the plans of liquidation

were adopted.

The fact that under other (unspecified) statutes

in New York or elsewhere the sale may occur at a

later stage of the condemnation proceedings does not,

contrary to petitioner’s suggestion (Pet. 7), create a

constiti tional infirmity, nor are constitutional ques-

tions raised by the fact that other taxpayers differ-

ent'v situated may qualify for the Section 337(a) ex-

ception while petitioner may not. See Phillips v. Com-

missioner, 283 U.S. 589, 602; Poe v. Seaborn, 282

U.S. 101, 117-118.

The petition for a writ of certiorari should be de-

nied.

Respectfully submitted.

ARCHIBALD Cox,

Solicitor General.

LouIsS F. OBERDURFER,

Assistant Attorney General.

DAVID O. WALTER,

MORTON K. ROTHSCHILD,

Attorneys.

MARCH, 1965

WG. S. GOVERNBENT PaINTiNG OFFice. 1965 767070 675