United States v. The Albertson Company, a Corporation

This appeal involves federal income and personal holding company taxes for the years 1944 and 1945. The facts are not in dispute.

The Albertson Company, appellee, hereinafter referred to as the taxpayer, is a California corporation with its principal place of business in Los Angeles. The taxpayer purchased certain parcels of real property during the years 1923 to 1928, subject to tax liens. In acquiring these parcels, the taxpayer had to pay additional costs, such as escrow fees, recording fees, lighting assessments, commissions, title policy fees, and improvement assessments. The taxes and other charges due at the time of purchase were paid by the taxpayer.

In computing its federal income taxes for the years of acquisition, the taxpayer deducted these extra costs from its gross income. The deductions were allowed by the Commissioner of Internal Revenue with resulting tax benefits to the taxpayer.

In 1944 and 1945, the taxpayer sold some of these parcels of property. In computing the basis for determining gain or loss from these sales, for tax purposes, the taxpayer included the above mentioned taxes and other charges as part of the cost (unadjusted basis) of the properties.…