Loren Cook Co. v. Director of Revenue
2013 Mo. LEXIS 297
| Mo. | 2013Background
- Loren Cook Co. purchased a Cessna 525B in 2005 and later sold a different Cessna 525A in a separate transaction.
- Cook used Time Value Property Exchange Sales, LLC (TVPX), a qualified intermediary, assigning both the purchase and sale contracts to TVPX to accomplish a §1031 federal tax-deferred exchange.
- TVPX briefly took title to each aircraft (only minutes) and then transferred title to the respective parties on the same day.
- Cook claimed a §144.025 “taken in trade” credit on Missouri use tax for the difference between the new purchase and the trade-in sale; the Director disallowed the credit and assessed additional use tax plus interest.
- The Administrative Hearing Commission denied Cook’s claim; Cook appealed to the Missouri Supreme Court arguing the intermediary made the transactions a single trade-in exchange for state tax purposes.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a sale of one aircraft and purchase of another from different entities qualifies as a "taken in trade" when a qualified intermediary is used | Cook: Use of TVPX (which took title briefly) converted the separate sale and purchase into one trade-in so §144.025 exemption applies | Director: Use of an intermediary does not transform two independent transactions into a trade-in; statute requires actual trade-in or statutory separate-sale exception | Held: No. Intermediary did not convert separate transactions into a trade-in; exemption denied |
| Whether federal §1031 treatment controls state use-tax treatment | Cook: §1031 exchange treatment supports treating the dealings as one exchange for Missouri tax | Director: Federal tax characterizations do not govern Missouri use-tax law | Held: Federal §1031 treatment irrelevant to §144.025 entitlement |
| Whether the statutory separate-sale reduction provision extends to aircraft | Cook: Implied parity with other property types | Director: Statute expressly lists certain property types; aircraft not included | Held: Statute’s separate-sale provision does not include aircraft; court will not add omitted categories |
| Burden of proof for tax exemption | Cook: Entitled to credit once apparent under exchange structure | Director: Taxpayer bears burden to show entitlement; exemptions construed narrowly | Held: Taxpayer bears burden; exemptions strictly construed; Cook failed to prove entitlement |
Key Cases Cited
- Great Southern Bank v. Dir. of Revenue, 269 S.W.3d 22 (Mo. banc 2008) (intermediary that merely facilitates separate sale and purchase does not "take in trade")
- Cook Tractor Co., Inc. v. Dir. of Revenue, 187 S.W.3d 870 (Mo. banc 2006) (use ordinary meaning of "taken in trade" when undefined in statute)
- Brinker Mo., Inc. v. Dir. of Revenue, 319 S.W.3d 433 (Mo. banc 2010) (tax exemptions are strictly construed against taxpayer)