544 F.2d 496 | Ct. Cl. | 1976
Lead Opinion
delivered the opinion of the court:
This is a tax refund action involving the investment tax credit provisions of the Internal Bevenue Code of 1954, § 38 and §§ 46-48.
During its short taxable year ended May 1, 1968, plaintiff acquired and placed in service the SS Delta Argentina. This vessel is a type of business property to which the investment credit applies. By virtue of the limitations imposed by § 46(a) (2), none of the credit arising on plaintiff’s acquisition of the SS Delta Argentina could be used in determining
Plaintiff has been engaged in the business of common carriage by water in foreign commerce since its incorporation in 1919. Its vessels, which all bear United 'States registry, carry freight and mail in regular service between United States ports on the Gulf of Mexico and foreign ports in the Caribbean, South America, and West Africa.
During the years in issue § 607 (b) of the Merchant Marine Act of 1936,46 U.S.C. § 1177 (b) (1964), required vessel owners, such as plaintiff, which received operating-differential subsidies,
The vessel here in question was constructed pursuant to the construction-differential subsidy provisions of the Merchant Marine Act of 1936, as amended, 46 U.S.C. §§ 1151 through 1161 (1964). Pursuant to these provisions, the Government pays such portion of the vessel’s cost as equals the difference between the lowest bid on the vessel by a domestic shipyard
To settle a dispute that involved the taxation of deposits made in reserve during World War II, when all vessels subject to operating-differential subsidy contracts were operated by and for the account of the United States, plaintiff executed a closing agreement on April 21, 1947, which was approved by the Treasury Department on July 16, 1947.
On April 8, 1968, plaintiff acquired and placed in service the SS Delta Argentina. The total purchase price was $10,847,205.80. Of that sum, $5,705,535.18 was advanced by the Government under the construction-differential provisions of the Merchant Marine Act. Plaintiff paid the bal-
On its federal income tax return for its short taxable year ended May 1,1968, plaintiff claimed investment credit earned of $359,916.94, which amount is 7 per cent of the $5,141,670.62 that plaintiff provided in purchasing the vessel. Because limitations imposed by § 46(a) (2) precluded application of this credit against plaintiff’s tax liability for this short taxable year, the entire sum became available for carryback and carryover in accordance with § 46 (b) (1). In accordance with §46 (b)(1), plaintiff carried the unused investment credit back to each of its three preceding taxable years, the calendar years 1965,1966, and 1967. Due to § 46 (a) (2) and § 46 (b) (2), plaintiff’s carrybacks to 1965, 1966, and 1967 were limited to $150,161.24, $58,593.95, and $37,227.06, respectively. All of the carrybacks for 1965 and 1966 were allowed and accordingly are not in dispute.
On its federal income tax return for the calendar year 1967,
On June 14, 1974, plaintiff filed a timely claim for refund of federal income taxes for the calendar year 1967 in the aggregate amount of $26,729.60, plus interest, disputing, inter alia, the disallowance of investment credit as to that portion of plaintiff’s cost of the vessel paid from its reserve funds. More than six months having passed without action on this claim, plaintiff timely filed its petition in this court
It is determined that investment credit is available only on that part of the ship’s cost which is used for depreciation purposes. Investment credit is not allowable on the cost of the ship which is from funds withdrawn from your tax deferred capital construction fund.5
The issue involved here is the same 'as the principal one in Pacific Far East Line, Inc. v. United States, ante at 71, a companion case argued at the same time as the instant caes. We refer the reader to our opinion in that case, published this same date. The issue is whether that portion of the cost of a ship paid from reserve funds, deposits in which were not subject to tax, is qualified for the investment tax credit.
CONCLUSION
For the reasons above, defendant’s motion for partial summary judgment is denied, plaintiff’s motion for summary judgment is granted, and the amount of recovery is to be determined pursuant to Eule 131(c).
All section references are to the Internal Revenue Code of 1954 unless otherwise noted.
Since December 31, 1937, plaintiff has been party to a succession of operating-differential subsidy contracts with the United States Maritime Commission (now Maritime Administration) (hereafter Maritime), entered into pursuant to §§ 601 through 613 of the Merchant Marine Act of 1936, as amended, 46 U.S.C. §5 1171 — 1183 (1964). The contract covering the year here in question was executed on September 26, 1957, to cover a 20-year period, commencing on January 1, 1958, and extending through December 31, 1977. This is the same form of agreement as entered into by the plaintiff in States S. S. Co. v. United States, 192 Ct Cl. 795, 428 F. 2d 832 (1970).
All companies then subject to operating-differential contracts executed substantially similar closing agreements. Maritime has required all subsequent applicants for operating-differential subsidies to execute like agreements.
Because plaintiff’s 1967 return was filed on June 14, 1968, it was able to compute its investment credit carryback from its short taxable year ended May 1,1968, and to include that sum in its 1967 return.
Tliis statement reflects the position taken by the Internal Revenue Service in Rev. Rul. 67-395, 1967-2 Cum. Bull. 11, and Rev. Rul. 68-468, 1968-2 Cum. Bull. 26.
Since no mortgage payment is involved in the instant case, the other issue in the companion case involving mortgage payments is not applicable.
Dissenting Opinion
dissenting:
I dissent in this case for the same reasons stated in my dissenting opinion in Pacific Far East Line, Inc. v. United
I would allow defendant’s motion for summary judgment, and deny that of the plaintiff and dismiss plaintiff’s petition.
In accordance with the opinion of the court, a memorandum report of the trial judge, and a stipulation of the parties, it was ordered on March 11, 1917 that judgment for plaintiff be entered for $26,729.60, together with interest as provided by law.
By order entered April 8,1977 the order entered March 11, 1977 was amended by adding the following paragraph:
it is further ordered pursuant to the stipulation of the parties, filed March 7, 1977, that it is unnecessary to reach plaintiff’s additional claim alleged in Paragraph 14 of the petition and such claim is dismissed without prejudice.
Dissenting Opinion
dissenting:
I dissent in this case for the reasons stated in my dissenting opinion in Pacific Far East Line, Inc. v. United States, ante at 94, and I adopt my dissenting opinions as my dissent in this case.