IRS ITG Audit Techniques Chapter 6.4

Chapter 6.4 – Relevant Court Cases

Note: Each chapter in this Audit Techinques Guide (ATG) can be printed individually. Please follow the links at the beginning or end of this chapter to return to either the previous chapter or to proceed to the next chapter or select a chapter from the Table or Contents on the left of this page.

INTRODUCTION

This chapter is intended to assist examiners in determining whether certain assets constitute § 1245 or § 1250 property. In addition to the legal framework presented in Chapter 2, the court cases listed below provide further guidance. Although the issue in many of the cited cases below relates to ITC, these cases remain important in determining whether property constitutes § 1245 property for purposes of ACRS and constitutes tangible personal property for purposes of MACRS. Hospital Corporation of America and Subsidiaries v. Commissioner, 109 T.C. 21, 54-55 (1997), acq. on this issue and nonacq. on other issues, 1999-2 C.B. xvi.

Unfortunately, there are no bright-line tests for distinguishing § 1245 property from § 1250 property. All of the cases are factually intensive and quite often the opinions of the courts conflict. Therefore, the examiner’s ultimate determination generally cannot be based merely upon reading one case. In addition to reading all the cases on point, the Service’s position must be reviewed and followed; as well, the examiner must also consider whether the Service has acquiesced to a particular position or case.

ARRANGEMENT OF INFORMATION

This chapter contains three attachments to assist examiners in locating pertinent cases that address specific assets:

Case Citations for the Relevant Court Cases;
Table by Case Name (Asset Descriptions by §§ 1245/1250 determinations); and
Table by CSI Master Format Division (Case Name & Asset Description by §§ 1245/1250 determinations)

CASE CITATIONS

1. AC Monk
   A.C. Monk & Co. v. United States, No. 78-126-CIV-4, 1981 U.S. Dist. LEXIS 17764 (E.D.N.C. Mar. 30, 1981), aff’d in part, rev’d in part, vacated and rem’d, 686 F.2d 1058 (4th Cir. 1982), on remand, 577 F. Supp. 4 (E.D.N.C. 1983).
2. Albertson’s
   Albertson’s v. Commissioner, 94-1 U.S. Tax Cas. (CCH) P50,016; 73 A.F.T.R.2nd (RIA) 558 (9th Cir. 1993); rev’g. 95 T.C. 415 (1990).
3. Bod-Nol
   Boddie-Noelle Enters. v. United States, 96-2 USTC ¶ 50,627 (Fed. Cl. 1996), aff’d without published opinion, 132 F. 3d 54 (Fed. Cir. 1997).
4. Centr Citrus
   Central Citrus Co. v. Commissioner, 58 T.C. 365 (1972).
5. Circle K
   Circle K Corp. v. Commissioner, T.C. Memo. 1982-298.
6. Cons Freight
   Consolidated Freightways, Inc. v. Commissioner, 74 T. C. 768 (1980), aff’d in part and rev’d in part, 708 F.2d 1385 (9th Cir. 1983).
   Consolidated Freightways, Inc. v. United States, 79-2 USTC ¶ 9440 (Ct. Cl. 1979).
   Consolidated Freightways, Inc. v. United States, 620 F.2d 862 (Ct. Cl. 1980).
7. Dixie Man
   Dixie Manor, Inc. v. United States, 79-2 USTC ¶ 9469 (W.D. Ky. 1979), aff’d, 81-1 USTC 9332 (6th Cir. 1981).
8. Duaine
   Duaine v. Commissioner, T.C. Memo. 1985-39.
9. Grinalds
   Grinalds v. Commissioner, T.C. Memo. 1993-66.
10. HCA
    Hospital Corp. of Am. & Subs. v. Commissioner, 109 T. C. 21 (1997), acq. in part and nonacq. in part, 1999-2 C.B. xvi.
11. Ill Cereal
    Illinois Cereal Mills, Inc. v. Commissioner, T.C. Memo. 1983-469, aff’d, 789 F.2d 1234 (7th Cir. 1986), cert. denied, 479 U.S. 995 (1986).
12. King Radio
    King Radio Corp. v. United States, 486 F.2d 1091 (10th Cir. 1973), aff’g D.C. No. KC-3320).
13. La Petite
    La Petite Academy v. United States, 95-1 USTC ¶ 50,193 (W.D. Mo. 1995), aff’d in unpublished opinion, 72 F.3d 133 (8th Cir. 1995).
14. LL Bean
    L.L. Bean, Inc. v. Commissioner, T.C. Memo. 1997-175, aff’d, 145 F.3d 53 (1st Cir. 1998).
15. Mallinckrodt
    Mallinckrodt, Inc. v. Commissioner, T.C. Memo. 1984-532, aff’d, 778 F.2d 402 (8th Cir. 1985).
16. McManus
    McManus v. United States, 700 F. Supp. 994 (W.D. Wis. 1987), aff’d, 863 F.2d 491 (7th Cir. 1988).
17. Metro
    Metro Nat’l Corp. v. Commissioner, T.C. Memo. 1987-38.
18. Minot Fed
    Minot Fed. Sav. & Loan Ass’n v. United States, 313 F. Supp. 294 (D.N.D. 1970), aff’d, 435 F.2d 1368 (8th Cir. 1970).
19. Morrison
    Morrison, Inc. v. Commissioner, T.C. Memo. 1986-129, aff’d, 891 F.2d 857 (11th Cir. 1990).
20. Munford
    Munford, Inc. v. Commissioner, 87 T.C. 463 (1986), aff’d, 849 F.2d 1398 (11th Cir. 1988).
21. Piggly Wiggly
    Piggly Wiggly Southern, Inc. v. Commissioner, 84 T.C. 739 (1985), aff’d, 803 F.2d 1572 (11th Cir. 1986), nonacq., 1988-2 C.B. 1.
22. Publix
    Publix Supermarkets, Inc. v. United States, 92-1 USTC ¶ 50,240 (Cl. Ct. 1992).
23. Schrum
    Schrum v. Commissioner, T.C. Memo. 1993-124, aff’d in part and vacated in part, rem’d, 33 F.3d 426 (4th Cir. 1994), on remand, T.C. Memo. 1995-103, aff’d in part and vacated in part without published opinion, 114 F.3d 1177 (4th Cir. 1997).
24. Scott Paper
    Scott Paper Co. v. Commissioner, 74 T.C. 137 (1980).
25. Shoney’s
    Shoney’s South, Inc. v. Commissioner, T.C. Memo. 1984-413, action on dec., 1986-048 (September 19, 1986).
26. TI
    Texas Instruments Inc. v. Commissioner, T.C. Memo. 1992-306.
27. Walgreen
    Walgreen Co. & Subs. v. Commissioner, 103 T.C. 582 (1994), rev’d, rem’d, 68 F.3d 1006 (7th Cir. 1995), supplemental op., T.C. Memo. 1996-374.
28. Westroads
    Westroads, Inc. v. Commissioner, 69 T.C. 682 (1978), acq., 1979-2 C.B. 2.
29. Whiteco
    Whiteco Industries, Inc. v. Commissioner, 65 T.C. 664 (1975), acq., 1980-2 C.B. 2.

TABLE BY CASE NAME

TABLE OF CASES BY CSI