Kimbell-Diamond Milling Co. v. Commissioner

14 T.C. 74 (1950)

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Kimbell-Diamond Milling Co. v. Commissioner

United States Tax Court

14 T.C. 74 (1950)

Facts

Kimbell-Diamond Milling Company’s (Kimbell-Diamond) (plaintiff) plant was destroyed in a fire. Kimbell-Diamond purchased the stock of Whaley Mill & Elevator Company (Whaley) with money from insurance proceeds and additional cash. Kimbell-Diamond planned to use Whaley’s plant and equipment to replace its previous facilities. Kimbell-Diamond liquidated Whaley in a matter of days and acquired Whaley’s assets. Kimbell-Diamond claimed it was entitled to the same basis in the acquired assets as Whaley ($300,000). The commissioner of the Internal Revenue Service (IRS) (defendant) allocated a basis of only $110,000, which was the cost of the assets (i.e., Kimbell-Diamond’s basis in the destroyed assets plus additional cash). Kimbell-Diamond filed a claim in the United States Tax Court.

Rule of Law

Issue

Holding and Reasoning (Black, J.)

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