The opinion of the court was delivered by: RYAN
Plaintiff, WEST STREET-ERIE BOULEVARD CORPORATION, timely filed this suit to recover a deficiency income tax assessment and interest thereon, paid by plaintiff under protest following Internal Revenue Service audit of plaintiff's corporate income tax return for the taxable period April 1, 1961 to December 22, 1961.
The Internal Revenue Service audit accepted as correct the ordinary taxable income as reported, showing an operating loss of $14,430.94, but included as taxable income subject to income tax a net capital gain of $343,560.51, which was "realized as a result of condemnation proceedings by the State of New York" involving a parcel of realty located in Syracuse, New York. The deficiency assessment of $85,890.13 which followed this audit, was paid and is sought to be recovered in this suit.
Plaintiff had reported these transactions but had claimed that this long-term capital gain was not includable in taxable income to the corporate plaintiff because a complete liquidation was effected by the plaintiff under the provisions of Section 337 of the Internal Revenue Code of 1954.
Plaintiff's return disclosed that all information returns had been duly filed by plaintiff with the District Director of Internal Revenue as required by Regulation Section 1.337-6 and Section 6043 of the Internal Revenue Code of 1954.
The question presented is whether under the facts of this case, plaintiff is entitled to the benefit of Section 337. I have concluded that it is, and award plaintiff judgment in an amount to be computed by the Court after further hearing, unless the parties stipulate to the amount.
At a post trial hearing held to afford an opportunity to counsel for argument, the following facts and record dates appeared undisputed.
Plaintiff, a New York realty holding corporation, was organized in 1947. It owned the fee to one parcel of real estate located at Erie Boulevard and West Street, Syracuse, New York. This was known as the Bartell property. In addition, it held a one-third beneficial interest in an adjoining parcel known as the Forsythe property, record title to which was in the Hawley Court Corporation.
For some time prior to January, 1960, it had been general knowledge that the State of New York was considering acquiring, either by condemnation or negotiated acquisition, both of these properties for arterial highway purposes.
The following historical dates are not in dispute:
January 7, 1960 -- Corporation adopts resolution for dissolution and liquidation under Section 337.
January 28, 1960 -- Treasury Form 966 filed with Internal Revenue Service notifying Government of corporation's plan of liquidation.
December 1, 1960 -- The appropriation map with regard to the Forsythe property was filed by the State of New York.
Dec. 27, 1960 -- Corporate action revoking resolution of January 7, 1960 and adopting new resolution for dissolution and liquidation under Section 337. It is the legal effect of this resolution which is in issue in this suit. The Government contends it was simply an attempt to further extend the one-year -- Section 337 -- period; the plaintiff contends it was a complete abandonment of the January 7, 1960 resolution and effected the adoption of a new plan of dissolution and liquidation.
June 21, 1961 -- Appropriation map with regard to Bartell property was filed by the State.
Dec. 22, 1961 -- Compensation for taking of Bartell property agreed upon.
Dec. 22, 1961 -- Plaintiff completed liquidation and distribution of assets.
On January 7, 1960, the stockholders of the plaintiff corporation adopted a resolution providing for the liquidation of its assets and distribution among the shareholders. Because of the importance of this ...