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Summaries - J

Click on the case name for the complete text.

Jantzer v. Commissioner
32 T.C. 161 (1959).
Aff'd 284 F.2d 348; 60-2 USTC '19802; 6 AFTR 2d 5882 (9th Cir. 1960).

FORESTER, Judge: In these consolidated proceedings the Commissioner determined deficiencies in the petitioners' income tax as follows:

The issue for decision is whether certain partnership receipts qualify for long-term capital gains treatment under section 117(k)(2) or l17(a) of the Internal Revenue Code of 1939.
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Jantzer v. Commissioner
284 F.2d 348; 60-2 USTC q. 9802; 6 AFTR 2d 5882 (9th Cir. 1960).
Affirming 32 T.C. 161 (1959).

The taxpayers were members of a partnership which held the tight to cut certain standing timber (the "Dwinnell timber") and which owned other timber (the "Onn timber"). The contract relating to the Dwinnell timber described the partnership as "purchaser" and Dwinnell as "vendor", and it recited that the vendor agreed to sell and the purchaser to buy all merchantable timber on designated timberlands at a designated price per thousand board feet. The price per thousand board feet was subject to escalation or reduction to reflect corresponding movements in the market price. The partnership was to cut and remove a minimum amount of timber each year or to pay a sum to be applied against the price of timber cut in the future, but it was not required to conclude cutting activity within any stated period. Title was to remain in Dwinnell until the timber was cut and paid for. If the partnership manufactured timber products other than lumber, Dwinnell was to receive 20% of the sale price. The partnership was liable only for fires resulting from its negligence. The contract was not assignable without Dwinnell's consent, The partners formed a corporation to which the partnership sold all of its logging equipment, and the partnership and the corporation entered into a loose oral arrangement under which the corporation was entitled to cut the Dwinnell timber at specified prices to be paid the partnership. This oral arrangement also permitted the corporation to cut timber from the Onn tract, which was owned by the partnership. The partnership received payments under the oral arrangement and the partners reported their shares of the net income as long-term capital gain. They contended that the arrangement with the corporation constituted a disposal under section 117(k)(2). Alternatively, they contended that the arrangement constituted the sale of the Dwinnell cutting contract or the outright sale of timber under section 117(a). The Commissioner contended that section 117(k)(2) was not applicable because partnership was not the owner of the Dwinnell timber and because the oral arrangement with the corporation was not a disposal. He also contended that section 117(a) could not apply because the Dwinnell contract had not been sold and because the partnership held the timber primarily for sale.
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Johnson v. United States
57-2 USTC ¶ 9848; 52 AFTR 1484 (W.D. Wash. 1957).
Aff'd 257 F.2d 530; 58-2 USTC ¶ 9725; 2 AFTR 2d 5376 (9th Cir. 1958).
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Johnson v. United States
257 F.2d 530; 58-2 USTC ¶ 9725; 2 AFTR 2d 5376 (9th Cir. 1958).
Affirming 57-2 USTC ¶ 9848; 52 AFTR 1484 (W.D. Wash. 1957).

The partnership of which taxpayers were members entered into a contract which gave the partnership the right to cut and remove all merchantable timber from certain land by a specified date. The partnership agreed to make stumpage payments to the owner. It was to pay increased stumpage if the market price of logs rose during the contract period. During negotiations, the landowner proposed that it have the option to buy alt logs cut, but upon objection of the partnership, the contract provided that the partnership had the right, but not the obligation, to sell all logs to the landowner. In practice, however, it did sell to the landowner. The partnership elected to treat its cutting as a sale or exchange under section 117(k)(i). The Government contended that the partnership was neither an owner of the timber nor the holder of a contract right to cut and was thus not qualified to elect under section 117(k)(1). It pointed to provisions of the contract inconsistent with the acquisition of title to the logs by the partnership: (1) the partnership was required to brand and scale the logs in the name of the landowner; (2) the contract referred to the partnership as a "logger"; (3) the contract required the partnership to pay taxes normally associated with logging (no reference was made in the contract to real or personal property taxes, nor was there any testimony at the trial as to who paid them); (4) the partnership was relieved of the duty to log when the landowner advised it of a fire hazard; (5) the landowner was given certain forfeiture and termination rights; and (6) the partnership was prohibited from transferring or assigning its rights without written permission from the landowner.
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Johnson v. Commissioner
62 TCM 46, Tax Ct. Mem. Dec. (CCH) 47,441(M) (1991)

[Credits: Investment tax credit: Capitalized reforestation expenses: Depletion: Deductions v. capitalization: Tree farm. Held: Petitioner is required to capitalize rather than expense reforestation expenses and, therefore, petitioner is entitled to the investment tax credit for the years in issue as provided by respondent in the statutory notice of deficiency.
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Johnston v. Commissioner
41 T.C.M. 258, 1980 P-H T.C. Memo ¶ 80, 477

A 200 foot portion of taxpayer's logging road was washed out by a flooded river in 1974. The road cost approximately $23 per foot to build. The taxpayer sought a casualty loss deduction of $25,000, the estimated cost of driving piles for a retaining wall needed to hold the road fill adjacent to the river. There was no retaining wall in place at the time of the flood. The Commissioner of Internal Revenue allowed a casualty loss of $3,400.
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Johnston v. Commissioner
51 AFTR2d 83-313
Affirming 41 T.C.M. 258

A 200 foot portion of taxpayer's logging road was washed out by a flooded river in 1974. The road cost approximately $23 per foot to build. The taxpayer sought a casualty loss deduction of $25,000, the estimated cost of driving piles for a retaining wall needed to hold the road fill adjacent to the river. There was no retaining wall in place at the time of the flood. The Commissioner of Internal Revenue allowed a casualty loss of $3,400.
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Jordan v. United States
62-1 USTC ¶ 9370; 9 AFTR 2d 1359 (S.D. Ala. 1962).

The taxpayers purchased cut-over timberland with the objective of growing timber. At the time of the purchase there was a substantial quantity of stumps on the land. No part of the purchase price was allocated to the stumps. The taxpayers were investors. They were not in the stump business and they were not timber operators. After holding the property for a number of years, during which time they made one or two sales of standing timber, the taxpayers learned that the stumps were saleable, and sold them for over $20,000. They reported the proceeds from the sale of the stumps as capital gain, but the Commissioner contended that the stumps had been held primarily for sale and thus were not capital assets.
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