Intermountain Lumber Co. v. Commissioner
United States Tax Court
65 T.C. 1025 (1976)
Facts
Dee Shook and Milo Wilson formed S&W Sawmill, Inc. (S&W) (plaintiff) to own and operate a sawmill facility. Shook agreed to transfer his sawmill site to S&W for 364 shares, or 100 percent, of S&W common stock. The same day, Wilson and Shook entered into a stock-sale-and-purchase agreement that would result in Wilson owning 182 shares, or 50 percent, of S&W common stock with corresponding voting rights. Later, Intermountain Lumber Co. (Intermountain) (plaintiff) purchased S&W from Shook and Wilson. Intermountain and S&W, as affiliated entities, filed a consolidated tax return in which they claimed an adjusted tax basis in S&W’s assets at their fair market value rather than Shook’s original, lower tax basis. The Internal Revenue Service (IRS) (defendant) found that Internal Revenue Code (I.R.C.) § 351 applied, making the acquisition by Intermountain a nonrecognition transaction. Thus, Intermountain was required to take a carryover basis in S&W’s assets, rather than taking the higher basis of fair market value. Intermountain sought the higher basis because it provided greater depreciation deductions to reduce tax liability. Intermountain challenged the finding in tax court, arguing I.R.C. § 351 did not apply because Shook did not have the 80 percent control required by I.R.C. § 351 immediately after the first asset exchange.
Rule of Law
Issue
Holding and Reasoning (Wiles, J.)
What to do next…
Here's why 705,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 44,400 briefs, keyed to 983 casebooks. Top-notch customer support.
- The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
- Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
- Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.
