242 F. Supp. 327 | E.D. Pa. | 1965
This case is now before the court for resolution of the issues raised in the respective motions for judgments filed by the taxpayer and the government. The parties are having difficulty in determining the exact amount of the tax payable under the court’s initial opinion in this case. See 237 F.Supp. 838.
Taxpayer is an integrated miner-manufacturer of portland cement. The basic problem in this case has been to ascertain what operations and processes in taxpayer’s business are to be considered mining, as opposed to manufacturing, for percentage depletion purposes and, secondly, to determine the proper method for excluding from taxpayer’s gross income its manufacturing costs and profits. Taxpayer and the government have asked for amplification and clarification respecting the court’s view of certain of the issues in this case.
Treatment to be Accorded Taxpayer’s Packaging Operations
In the court’s initial opinion in this case it was clearly held that the cost of loading and packaging taxpayer’s finished Portland cement as well as the proportion of profits attributable to such cost are non-mining costs and profits and, consequently, must be excluded from taxpayer’s gross income for purposes of determining its depletion basis. The court further approved the so-called “proportionate cost and profits” method of removing this manufacturing income from taxpayer’s gross income. However parenthetically the court noted
Treatment to be Accorded Use of Additives purchased by Plaintiff for mixing with its Quarried Cement Rock
In the process of producing port-land cement from taxpayer’s quarried cement rock, it is necessary to add certain limestone, iron ore and sand to the cement rock. These additives are blended and mixed with the cement rock and the component materials are pulverized and ground to a fine particle size. In the initial opinion in this case, the court referred to these processes generically as “blending” and held that the costs attributable to such “blending” must be considered mining costs.
Treatment to be Accorded Plaintiff’s resale of purchased Mortar Cement
The hopefully final difficulty encountered by the parties in recomputing plaintiff’s tax in accordance with the court’s decision in this case revolves around the tax treatment to be accorded the income received by plaintiff from the sale to its customers of mortar cement not mined or manufactured by plaintiff, but purchased by it from other producers. The government in its computation has treated this operation just as if it were another post-kiln process involved in the mining-manufacturing of Portland cement, despite the fact that this court found that plaintiff’s income from the purchase and resale of mortar
The findings of fact and conclusions of law expressed in the initial opinion of this court, 237 F.Supp. 838, and the subsequent opinion and order denying plaintiff’s motion for reargument and reconsideration are reaffirmed. The statements contained in this opinion shall constitute additional findings of fact and conclusions of law in this case.
. Whitehall Cement Mfg. Co. v. United States, 237 F.Supp. 838, 842, n. 6 (E.D.Pa.1965).
. Allowable indirect costs are those expenses such as office salaries, advertising and sales expenditures which are incurred for the benefit of both the mining and manufacturing phase of taxpayer’s integrated business. These indirect costs are allocated between the mining and manufacturing phase of taxpayer’s operations in the proportion that the direct processing cost up to the kiln feed stage bear to the direct processing cost after the kiln feed stage. See discussion in court’s opinion, 237 F.Supp. 838, at 843, 844.
. Whitehall Cement Mfg. Co. v. United States, 237 F.Supp. 838, 842 (E.D.Pa. 1965).
. Whitehall Cement Mfg. Co. v. United States, 237 F.Supp. 838, 844 (E.D.Pa.1965).