Bell Lines, Inc. (Bell) (plaintiff) was a trucking company that wanted to dispose of its old trucks and acquire new trucks. Bell refused an offer to trade its old trucks for new trucks from Mack Trucks, Inc. (Mack). Instead, Bell contracted to pay cash for Mack’s trucks. Bell then signed another contract for the cash sale of its old trucks to Horner Service Corporation (Horner). Without Bell’s knowledge, Mack and Horner had already arranged for Mack to buy Bell’s old trucks from Horner. On its books, Mack showed the sale to Bell and purchase from Horner as a trade-in of Bell’s old trucks for Mack’s new trucks. However, Bell’s books showed the sale and purchase as separate transactions. Bell claimed the cash price paid for the new trucks as its basis for tax depreciation deductions. The commissioner of internal revenue (commissioner) (defendant) determined that the substance of Bell’s transaction was a nonrecognizable like-kind exchange under § 1031(a) of the federal tax code. As a result, the commissioner found that Bell’s depreciation must be based in part on the value of the old trucks. This would be to Bell’s long-term tax disadvantage. The commissioner assessed a deficiency against Bell. Bell paid the assessment and then sued the commissioner in federal district court for a refund. The district court ruled in Bell’s favor, and the commissioner appealed to the United States Court of Appeals for the Fourth Circuit.