The opinion of the court was delivered by: WYATT
This is a second motion by defendant for a summary judgment in its favor. Fed.R.Civ.P. 56. The motion must be denied.
The action is for refund of income taxes paid by plaintiff for the two years ending respectively on December 31, 1953 and December 31, 1954. 26 U.S.C. § 7422. Jurisdiction is asserted, and appears to exist, under 28 U.S.C. § 1346 (a) (1).
Plaintiff in 1947 issued thirty year 3% debentures in exchange for shares of its own $6 preferred stock, $6 preference BB stock, and 60 cents preference B stock. By the terms of the indenture, plaintiff was required to retire annually $1,500,000 principal amount of debentures.
In 1953 and in 1954, plaintiff purchased in the open market, and retired, in excess of $1,500,000 principal amount of debentures.
Plaintiff asserts that when the debentures were issued in 1947 it received less in value for them than their face (principal) amount.
Starting from this assertion, plaintiff then has two alternative theories to support the present claim for income tax refund:
first, that plaintiff paid more in the open market for the debentures retired in 1953 and 1954 than plaintiff had received for them on issuance in 1947 and that this difference is a "loss" deductible under 26 U.S.C. § 165 (a); or
second, that the debentures were issued in 1947 at a discount, the amount of which is deductible, prorated over the 30 year life of the debentures, under Treas. Reg. § 1.61-12 (c) (3).
Defendant moved for summary judgment and the matter was heard by Judge Mansfield on February 10, 1970.
On July 24, 1970, Judge Mansfield filed a careful opinion, since reported at 316 F. Supp. 61. This opinion sets out the factual and legal background, which will not be repeated here.
The motion of defendant for summary judgment was in all respects denied.
Judge Mansfield further found that plaintiff was entitled to summary judgment as to all issues of law and as to all issues of material fact, except one: "the value to plaintiff of the preferred and preference shares received by ...