Taxpayer Maid of the Mist Corporation appeals from an opinion by Judge Theodore Tannenwald of the United States Tax Court sustaining a deficiency in income tax for the year 1972 in the amount of $11,881.61. The Tax Court decision is affirmed on the basis that the investment tax credit on foreign-produced goods claimed by taxpayer for the construction of a vessel in Canada was barred by § 48(a)(7) of the Internal Revenue Code of 1954.
Before Moore, Friendly and Gurfein, Circuit Judges.
Maid of the Mist Corporation ("taxpayer") is a New York corporation with its main office located at Niagara Falls, New York. Its principal business is the operation of excursion boats at the foot of Niagara Falls. Sometime prior to December 16, 1971, taxpayer decided to expand its fleet of excursion boats. On December 16, 1971, James V. Glynn ("Glynn"), taxpayer's president, met in Port Dover, Ontario, with representatives of Hike Metal Products, Ltd. ("Hike"), a Canadian shipbuilding concern which had previously built excursion boats for taxpayer. At this meeting, a contract between Hike and taxpayer*fn1 for the construction and purchase of an excursion boat was signed. The contract had been drafted by taxpayer's counsel two days before the meeting and was apparently the result of prior negotiations between the parties. The purchase price was $129,737.32.
The contract provided that "Title to and property in the Vessel shall be vested in the Shipowner (i. e., taxpayer) from the signing of this contract." The contract also provided that $3,000 of the purchase price was to be paid to Hike when the contract was signed. However, Glynn did not pay Hike the $3,000 at that time, despite the fact that he had a check for that amount dated December 16, 1971, and made payable to Hike in his possession during the December 16 meeting. Instead, Glynn delivered the signed contract to Hike, together with a letter which read as follows:
"We hand you herewith original and duplicate copy of contract for the construction of a vessel, duly executed by the Ship Owner.
This contract is conditionally delivered to you and such delivery shall become final when you are in receipt of the Ship Owner's (i. e., taxpayer's) check payable to your order in the sum of $3,000.00.
As you are aware, this contract contemplates the building of a ship which Ship Owner will be able to place in the Niagara River beneath the Falls of Niagara by the use of cranes. As of this date, the contract for such delivery has not been executed and it is anticipated that it will be executed within the next few days and, upon the acceptance of that contract, the undersigned will forward to you the above-mentioned check.
In the event that delivery of the contemplated vessel is not possible by crane, then it will be necessary for us to enter into a new contract, which will call for the building of the vessel and the delivery in parts to the Maid of the Mist Landing and its reassemblage at that point before launching. Therefore, the necessity of conditioning this delivery this date."
On December 18, 1971, taxpayer and Modern Crane Rentals, Ltd., signed a contract in Niagara Falls, Ontario for the delivery of the excursion boat by crane to the bottom of the Niagara River Gorge. On that same day Glynn mailed the $3,000 check to Hike from an Ontario, Canada, post office box. Hike received this check on December 21, 1971. The excursion boat was delivered to taxpayer in June, 1972.
In its income tax return for the year 1972, taxpayer claimed a seven percent investment tax credit for the purchase of the Maid of the Mist III. The Commissioner, however, disallowed the credit on the ground that the excursion boat was acquired pursuant to an "order" placed between August 16, 1971 and December 20, 1971 when the investment tax credit provisions were suspended with respect to foreign-manufactured goods pursuant to § 48(a)(7) of the Internal Revenue Code of 1954. In a memorandum opinion, containing findings of fact, Judge Theodore Tannenwald, Jr., of the United States Tax Court, upheld the Commissioner's determination. The decision, entered by Judge Wiles on August 11, 1977, sustained a deficiency in income tax for the year 1972 in the amount of $11,881.61. From that adverse decision, taxpayer brings this appeal. For the reasons set forth below, we affirm.
On August 15, 1971, the President of the United States, in an effort to reduce the country's balance-of-payments deficit and to strengthen its economic position, issued Proclamation 4074, 3 C.F.R. 60 (1971-1975 Compilation), Reprinted in 85 Stat. 926 (1971). The Proclamation, which became effective the following day, imposed a ten percent import surcharge on foreign-produced goods brought into the United States. In a related move, Congress thereafter enacted § 48(a)(7)*fn2 of the Internal Revenue Code of 1954 which temporarily limited the investment tax credit (See I.R.C. § 38) to items produced in the United States. Section 48(a)(7) denied the investment tax credit to foreign-made goods "acquired pursuant to an order placed on or before the date of termination of Proclamation 4074 . . .." On December 20, 1971, the President terminated Proclamation 4074. See Presidential Proclamation 4098, 3 C.F.R. 94 (1971-1975 Compilation), Reprinted in 86 Stat. 1591 (1971). Thus, foreign-manufactured goods acquired pursuant to an "order" placed between August 16, 1971, and December 20, 1971, are ineligible for the investment tax credit.
The sole issue presented by this appeal is whether taxpayer "ordered" the Maid of the Mist III on or before December 20, 1971, or at a time during which the investment tax credit on foreign-produced goods was suspended. The ...