Commissioner v. Gillette Motor Transport, Inc.

On August 12, 1944, pursuant to the president’s orders, the director of the Office of Defense Transportation assumed possession and control of the facilities owned by Gillette Motor Transport, Inc. (Gillette) (plaintiff) for the purpose of transporting war equipment. A federal manager was appointed, who directed Gillette to resume normal operations. Gillette retained title to the property. Possession and control by the government were terminated on June 16, 1945. Gillette presented a claim for just compensation to the Motor Carrier Claims Commission (the commission). The commission determined that the government had deprived Gillette of the right to freely determine what use to make of its facilities, and therefore, the rental value of the facilities represented a fair measure of Gillette’s loss. In 1952 the commission awarded Gillette the total sum of $157,843.99, which represented the fair rental value of the facilities from August 12, 1944, to June 16, 1945, and included interest. The commissioner of the Internal Revenue Service (defendant) argued that the compensation represented ordinary income and that a regulation of the facilities had occurred, not a taking. Gillette argued that the compensation represented a long-term capital gain pursuant § 117(j) of the Internal Revenue Code of 1939. The United States Tax Court held that the award represented ordinary income. However, the United States Court of Appeals for the Fifth Circuit reversed and found in favor of Gillette. The Supreme Court granted certiorari.