Latimer-Looney Chevrolet, Inc. v. Commissioner

Latimer-Looney Chevrolet, Inc. (Latimer-Looney) (plaintiff) operated a General Motors franchise selling new and used Chevrolet and Cadillac vehicles. Latimer-Looney acquired new inventory through a floor-plan-financing arrangement with General Motors, paying a nominal handling fee and interest on vehicles held more than five days without payment. New vehicles sold to customers were required to remain unused and were typically delivered to customers shortly after arrival. However, Latimer-Looney designated certain new vehicles as company cars. Once designated, Latimer-Looney paid for the cars in full, insured them for its benefit, and registered them in its own name. Afterward, there were no restrictions on the vehicles’ use. The cars were used for various legitimate business purposes, including manager travel, customer service, vehicle towing and delivery, employee transportation, business-related errands, and civic programs. To avoid an increase in operating costs and a decrease in value, company cars were sold after accumulating between 8,000 and 12,000 miles and being held for over a year. On its 1949 tax return, Latimer-Looney claimed $3,214.34 in depreciation deductions for 26 company cars and reported $5,691.54 in long-term capital gains from the sale of 10 company cars. The commissioner of the Internal Revenue Service (defendant) assessed a deficiency, asserting that the company cars did not qualify for § 1231 treatment because they remained inventory and were held for sale to customers. Latimer-Looney petitioned the tax court for a redetermination.