Petition for Rehearing — C. D. Construction Corp. v. Commissioner

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IN THE

Cxtober Term, 197 |

® - No. 71-852 -

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C. D-ConstRUcTION CoRPORATION, fe

; ows Petitioner,.

vs. 7

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COMMISSIONER OF INTERNAL REVENUE. : :

‘Regpondent.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Fourth Circuit.

!

- Petition for Rehearing and Supplemental Brief.

re | GEORGE T. ALTMAN,

"424 South Beverly Drive,

+ Beverly Hills, Calif. 90212.

Attorney for Petitioner.

Of Cocoa:

. STANLEY H. WILEN,

ase 326 St. Paul Place,

: . Baltimore, Md... 21202.

Parker & Son, Inc., Law Printers, Los Angeles. Phone 724-6622

any PRR ee a ee ee pe ercerragd werner state aE AAD SORTED seh OR New. we

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IN ‘THE

suprem Court of the United States

[7 - % °

October Tesi a7 1

Ra: 73-852.

6 : “ a oats : : 7

C. D. CONSTRUCTION CORPORABION,

‘ : ; oy | Petitioner,

: VS,

COMMISSIONER Or INTERNAL REVENUE.

| | } ‘Respondent.

Sennen

. On Petition for a Writ of Ceréersri to the United States

Hoi Court of Appeals for the Vourth Ciecuit.

Petition for Rehearing and Supplemental Brief.

ee

Petitioner hereby ‘pstitions this Court <for rehearing .

of its petition for a writ of ertiorari.

e original petition herein -was denied ‘March 20,:

1972... This petition for rehearing is based. on the de- ~~

cision’ and opinion of. this Court in Commissioner ve.

First Security Jsank, No. 70-305, decided on the next

_, day, March 21, 1972. It is for that reason that we re-

gard this petition: for ane as also a supplemental

brief under Rule 24(5).

As this Court noted in its opinion in the Firii Se-

curity Bank case, in footnote 11, it. decided that case

on a-different ground -from that relied on by the Tenth

_ Circuit there. The decision below herein is in important.

elements’ inconsistent with that new ground. In connec-

”

i ee poet

tion with one > of those inconsistencies we shall refer to -

{Wo excerpts from the opinion of the Court below in the

_ related C ‘harles Town, Inc. case, 372 F. -” 415. bisa are

_shown i in the footnote below.’

‘The essence of this Court's: position in The First .

pe Bank case is stated in the a Se quotation

from its opinion:

“In cases dealing with the enpat of income,

it has been assumed that the person, to whoni the

inceme was attributed could have received it.”

” ‘Thus the Court places io a separate category income “ac?

tually réceived by a person whether or rightfully

received: and where the income is not actually received

by the person, the attribution.of the income to him is

- limited to situations in which he could have received if,

and could-have receivéd it rightfully. Generating the

incomy. oF carning. it, is not cnough. Income not re-

ceived by a person cannot be’ a{jributed to cap

ve it.

he had. not‘ just the power, but the right to

For this reason we point out again, as we did in pur

original petition, at p. 7. that nowhere did cither the

court below. or the Tax Court, challenge the: validity.

tM? fairness, or the reasonableness, of cither of the con-

ttacts between Charles Town, Inc. apd Fairmount Steel

Corporation (hereinafter referred to as Charles Town

and Fairmount, respectively). And how, abserit such a -

*At 16: “The Commissioner's allocation wide? Sectiow

48> le’ peodhented’ cn the siaged shifting of ques trom on

controlled entity (Charies Town) ta another (Fairmount) for the

Pure of unhzing net operating loss carryovers of the latter.”

At page 418 “Fairmount’s return for its fiscal year ended

jum? 30, 1959. showtd ‘o net profit of $732,299.86 from the

recnr mocts. but becadse of its allowable nct opcrating hows

carryover, a peld no federal incom? ton an Gils cmnedet:”

ae

e-«

_ challenge, Chartes Town had the right ae nasal

to receive the income attributed to it. under Section 482,

as its income, oe Serene tH, des niver oven been

“argued. by respondent.

2. Since the present proceeding presents caty the

liability of petitioner's predecessor, Fairmount, as trans- .

feree of Charles Town, we do not; of course, question

against it became final, regardless of its itt This

makes all the more important, however, the point shown

at pp. 12-13 of our original petition that a jiability for .

taxes determined under Section 482 is not self-assessing.

and the conclusion which follows therefrom, as stated

in Interstate Fire Insarance Company v. U.S”. 215 F.

Supp. 586, 598, afficmed. “in all things” and for “the

reasons set forth therein,” €.A. 6, 339 F.2d 603: “The

use and application of section 482 does not result in *

an enforcible tax consequence gntil there has been a

reallocation resulting in a reassessment of taxes.” To this

must now be added, because of this Court's decision

in No. 70-305, « correct reallocation resulting in a re-

assessment of taxes. -

Si tiae Galas: caatiadl iohtien ts hes dina

of the Sixth Circuit. But certainly that does not erase

the conflict with it, :

3: This Court, in its opinion in No. 70-305, makes

it clear that a right cannot be assumed if it is. one pro-

hibited by law. Yet the Court Below bercin treated

Fairmount in substance as a stockholder of Charles

Town even though, under the law of the state. as shown

in our original petition. at p. 9. Charles Town had

no authority to issue the stock so imputed. [t follows

that the treatment by the Cou below, of Faitmount as

in substance a ‘stockholder of Charles Town, ‘is in con-

flict, -not only with: Commissioner v. Stern, 357 US.

39, but with the decision now of this Court in) No.

70.305. =~ “.

We take advantage of this potnt also to repeat that

this issue of stockholding “in substance” was net raised

here ins the Tax Court, the trial court. The least that

the Court below should have done was to return the

case to that Court for retrial on that issuc.

4. -We come now to the excerpts frem the Charles

To¥en, Ine. case shown in footnote | above. As shown

there, the Court below obscfved that the Commission:

er’s allocation under Section 482. was “predicated on

. the alleged shifting of the profits from one controlled |

entity (Charles Town) to another (Fairmount) for the

purpose of utilizing net operating loss carryovers of the

latter.” . e al

« In No. 70-305; in footnote 4. this Court makes it

clear*that Section 482 could not be used for any such

purpose. I, could not be used. this Court there said.

to prevent taxpayers from “lawful structuring . jof their

business affairs! to Mumimize taxes.” Ht could not be used °

then to prevert.a taxpayer from structuring hes business

affairs so as to be able to deduct net operating losses in-

curred. Indeed. if a ‘tax could ever be said to be immoral

“it would be so if because of mere artificial corporate

barriers the very persons whose ‘control resulted in the

application of Section 482 could not deduct their net

operating losses. We submit .the purpose stated iby the

Court below for the application of that section is in.

-clear conflict with this Court's opinion in No. 70-305.

“For the reasons stated above: we urge grant of the

writ of certiorari, At least, in view of the fact that we

had no opportunity to apply the new ground stated by

this ‘Court in No. 70-305 before it’ acted on our peti-

tion for the writ, we suggest alternatively that the case

be sent back to the Court below, in “accordance with

the practice in this Court, for reconsideration in the

livht of this Court's opinion in No." 70-3052 as well

as reconsideration. of the issue of stockholding “in

substance” not raiséd, as noted above, in the trial court.”

Respectfully submitted,

GEORGE T. ALTMAN,

Attorney for Petitionér:

“OF Counsel:

_ STANLEY H. WiLEN, | }

“See Supreme Court Practice by Stern and Gressman. Fourth

Ed.-p. 221 at fn 32 and the numerous cases cited there on r.

same point.

a : —-o—.

Certificate of Counsel.

This petition for rehearing is presented in good faith

and not for delay and is. restricted to the erounds stated

in Rule S8{2).

a ~ Coporare PT. At raran

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